Ireland Revenue has updated its Tax and Duty Manual on Section 110, clarifying Transfer Pricing, arm's length requirements, PPN interest restrictions, qualifying asset conditions and other rules applying to companies under the securitisation regime.
Ireland Revenue has clarified the application of Section 110 of the Taxes Consolidation Act (TCA) 1997, including Transfer Pricing, arm’s length requirements and restrictions on profit participating notes (PPNs), in eBrief 120/2026 published on 21 August 2026.
The updated Tax and Duty Manual addresses specific areas of uncertainty concerning companies operating under Ireland’s securitisation regime.
Transfer pricing and arm’s length rules
For chargeable periods beginning on or after 1 January 2020, Transfer Pricing rules apply to transactions between associated persons.
For transactions with non-associated parties, the arm’s length standard refers to arrangements between parties with separate and distinct interests, each acting solely in its own interests when agreeing the terms.
Revenue also states that the absence of a fee does not automatically mean an arrangement is not at arm’s length. In repackaging or fund-subsidiary structures, audit, legal or management costs may be paid directly by an arranger or parent investment fund for commercial or administrative reasons without affecting Section 110 status.
Conditions for qualifying companies
A company must meet seven conditions to qualify under Section 110. It must be tax-resident in Ireland, acquire, hold or create qualifying assets, and carry on the business of holding and/or managing those assets in Ireland. Its activities must otherwise be limited to those ancillary to that business.
On the first day it acquires, holds or creates qualifying assets, their market value must be at least EUR 10,000,000. The company does not have to maintain this minimum value after the first day.
It must also notify Revenue of its status using the relevant statutory form and ensure that transactions and arrangements, apart from certain Profit Participating Notes, are entered into at arm’s length.
Profit computation and debt costs
Profits are calculated under Case I of Schedule D. Revenue notes, however, that applying Case I calculation rules does not itself satisfy a separate “double trade” test where trading status is required.
Section 110(2)’s wording “notwithstanding any other provision of the Tax Acts” determines how conflicts with other provisions are considered. It overrides Section 138(3) distribution rules but is applied before Section 811C(1)(b). Section 110 companies are also taxable on Irish distributions received.
Expenses incurred in issuing long-term debt are generally fully deductible as costs of carrying on the business, regardless of the debt’s term.
Profit Participating Notes (PPNs) restrictions
PPNs support the tax-neutral treatment under Section 110(4), but deductions for profit-participating interest are subject to restrictions.
Under the “Specified Persons” Restriction (ss. 4A), profit-participating interest is non-deductible when paid to a connected party that is a tax-exempt entity, such as a pension fund. For listed or wholesale debt, the same applies where the qualifying company knows at issue that the recipient will not be subject to tax on the interest.
The Significant Influence & Control (ss. 7) provisions cover significant influence over financial and operating policy decisions combined with a direct or indirect 20% ownership interest.
The “Return Agreements” (ss. 4B) provisions restrict deductions where arrangements result in a sweep-out of profits. The restriction excludes performance management fees, limited-recourse clauses, and interest rate, currency or credit default swaps.
Irish property business and loan origination
Under Irish Property Business (ss. 5A), PPN interest cannot be deducted where it relates to an Irish property business involving loans, units or shares deriving value from Irish land.
Exceptions cover CMBS / RMBS and CLO transactions, sub-participations and certain Loan Origination Business.
Loan origination includes making loans or acquiring them “on or about” the date they were advanced. If a loan is restructured into equity, that part of the business may instead be treated as a specified property business unless the equity value is minimal.
Appendix I sets out the Subject to Tax Decision, including look-through rules for partnerships, CFCs, US LLCs and “check-the-box” entities.
The Main Purpose Test (ss. 5) requires PPN interest to be entered into for bona fide commercial purposes, with tax avoidance not being a main purpose.
Residence and carrying on business
Directors must act independently and properly discharge their duties, including appropriate oversight in Ireland without taking instructions from third parties.
The business of holding and managing qualifying assets must be actively carried on in Ireland. A company that remains passive for a prolonged period, without active management or portfolio review, may fail to meet this requirement.
Directors must undertake oversight functions in Ireland, including reviewing outsourced managers.
PIK notes and commodities
For Payment-in-Kind (PIK) Notes, Section 51 permits the deduction of the market value of notes issued as interest rather than their face value.
Commodities are defined as tangible assets, excluding financial assets and currencies, traded on a recognised commodity exchange such as CBOT, NYMEX and LME. They may qualify where used to facilitate financial transactions involving physical commodity underlyings.
Foreign withholding tax
Under Section 81(2)(p), foreign withholding taxes suffered on a qualifying company’s income are not deductible when computing profits.
Schedule 24 Credit Relief may instead provide relief as a credit, a reduction in income, or both. The credit is capped at the Irish corporation tax attributable to the relevant income stream, using the Irish Measure of Foreign Income (IMI).
Where the foreign effective tax rate exceeds the Irish tax rate of 25%, non-creditable foreign tax may reduce taxable foreign income under paragraph 7(3)(c), but cannot reduce the IMI below zero.
The updated manual provides Revenue’s interpretation of the statutory rules that apply to Section 110 companies, with particular detail on transaction pricing, PPN deductions, qualifying assets and the conditions for maintaining the regime’s tax treatment.
