IRELAND Trends and Developments Contributed by: Maria McElhinney and Alice Boland, A&L Goodbody LLP
”trading” and trading status is now more closely con - sidered on a standalone basis rather than in a group context. Entities with insufficient activities and not classed as “trading” entities are subject to a higher tax rate (a 25% corporation tax rate generally applies to non-trading income). In terms of intra-group funding vehicles, the Finance Act (Finance (No. 2) Act 2023 (the “Act”) introduced changes, in the form of a ”Qualifying Financing Com - pany”. This new concept provides companies involved in intra-group lending with the potential to make use of a specific tax treatment, subject to specific condi - tions being fulfilled. The primary benefit of this new concept is that subject to satisfying the relevant con - ditions, a Qualifying Financing Company can obtain a tax deduction for interest paid on external third-party finance borrowed for on-lending to a direct 75% trad - ing subsidiary resident in an EU/EEA state. These changes in practice did not impact upon the “Section 110” regime which remains a viable option for achieving tax neutrality. These changes led to sev - eral internal group structures, including the insertion of Section 110 vehicles and provides further consid - erations for the structuring requirements of new plat - forms going forward. The Act also contained certain measures which can impact upon the Irish tax treatment of the outbound payments of interest, royalties and the making of dis - tributions by an Irish tax resident entity (or the Irish branch of a non-resident company) to an “associ - ated entity” resident for tax purposes in a ”specified territory”. A “specified territory” for these purposes broadly means a jurisdiction which is listed in Annex I of the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes or a zero tax territory. A potential impact of these new rules is that they can “switch off” particular Irish interest withholding tax exemptions on payments to lenders (or permanent establishments of lenders) which are resident for tax purposes or established in specified territories in par - ticular scenarios. The provisions have been of particu - lar focus to lessors whose ultimate holding company is based in these territories or which are members of
groups which historically lent intra-group funds from these jurisdictions. Insurance settlements The first few months of 2025 saw the first wave of liti - gation in the Irish Commercial Court in Dublin relating to insurance claims arising out of the Russian invasion of Ukraine reach their conclusion. Following the imple - mentation of sanctions on Russia in February 2022 by the EU and its global partners, which left more than 400 planes stranded in Russia, six lessors including Avolon, BOC Aviation, Nordic Aviation Capital, CDB Aviation, Hermes Aircraft A1264 Ltd and SMBC Avia - tion Capital filed a total of more than EUR2.5 billion of claims under their contingent and possessed (C&P) insurance policies with the High Court in Dublin. These proceedings were grouped together and heard in a single trial, which started in June 2024. The pro - ceedings were centred around the obligation of the insurers to compensate lessors for aircraft stranded in Russia and key issues included: whether there had been a physical loss; whether the lessors had a duty to mitigate their loss; whether the claims fell under the “war risk” or ”all risk”, “contingent” or ”possessed” coverage; and whether lessors were obliged to seek compensation under the operator’s policy first. The cases represent the largest commercial court trial to take place in Ireland. In March 2025, Avolon, BOC Aviation, Nordic Aviation Capital, CDB Aviation, Hermes Aircraft A1264 Ltd and SMBC Aviation Capital reached settlements with, or discontinued their claims against, the remaining insurers bringing an end to the first wave of litigation. The terms of these commercial resolutions remain confidential. Similar cases were brought by lessors, including Aer - Cap, Merx, DAE, Falcon 2019-1, KDAC and GASL Ire - land Leasing A-1 in the English High Court in London in October 2024 with a substantial judgment in this trial expected in June 2025. Outside of insurance litigation, lessors continue to attempt to agree settlements with Russian lessees under operator insurance policies. These settlement agreements are completed in line with applicable sanctions and often require the approval of the US
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