111A Interpretation (Part 4A)

Summary

This section is the interpretation section for the Part and contains the definitions used in the Part.

Details

Definitions

(1) The section contains a series of definitions, including —

“acceptable financial accounting standard” means International Financial Reporting Standards and the generally accepted accounting principles of Australia, Brazil, Canada, the Member States of the European Union, the members of the European Economic Area, Hong-Kong (China), Japan, Mexico, New-Zealand, the People’s Republic of China, the Republic of India, the Republic of Korea, Russia, Singapore, Switzerland, the United Kingdom and the United States of America.

“the Acts” means the Tax Acts and the Capital Gains Tax Acts.

“adjusted covered taxes” is defined in section 111U.

“authorised financial accounting standard”, in respect of an entity, is a set of generally acceptable accounting principles permitted by an authorised accounting body in the jurisdiction where that entity is located, where that authorised accounting body has legal authority in that jurisdiction to prescribe, establish or accept accounting standards for financial reporting purposes.

“consolidated financial statements” means:

1. the financial statements prepared by an entity in accordance with an acceptable financial accounting standard, in which the assets, liabilities, income, expenses and cash flows of that entity, and of any entities in which it has a controlling interest are presented as those of a single economic unit,
2. the financial statements of a group to which paragraph (b) of the definition of “group” applies (i.e. a main entity and a permanent establishment) prepared by an entity in accordance with an acceptable financial accounting standard,
3. where an ultimate parent entity has financial statements described in paragraphs (a) and (b), that are not prepared in accordance with an acceptable financial accounting standard, the financial statements of the ultimate parent entity that have been subsequently adjusted to prevent any material competitive distortions, and
4. where an ultimate parent entity does not prepare financial statements as described under paragraph (a), (b) or (c), the financial statements that would have been prepared if the ultimate parent entity was required to prepare such financial statement in accordance with,
   1. an acceptable financial accounting standard, or
   2. another financial accounting standard, provided such financial statements have been adjusted to prevent any material competitive distortions.

“consolidated revenue test” has the meaning given to it by section 111C.

“consolidated revenue threshold” is €750,000,000 for a fiscal year of 12 months, and where the fiscal year is greater or less than 12 months the amount of €750,000,000 will be adjusted proportionately.

“constituent entity” means an entity that is a member of an MNE group or of a large-scale domestic group, or any permanent establishment of a main entity that is a member of an MNE group, other than an excluded entity as defined in section 111C.

“constituent entity-owner” means a constituent entity that owns, directly or indirectly, an ownership interest in another constituent entity of the same MNE group or same large-scale domestic group.

“controlled foreign company tax regime” is a set of tax rules, other than a qualified IIR, under which an entity with a direct or indirect ownership interest in another entity which is not tax resident in the same jurisdiction of the first mentioned entity, or the main entity of a permanent establishment, is subject to taxation on its share of part or all of the income earned by that other entity or permanent establishment, irrespective of whether that income is distributed to the first mentioned entity.

“controlling interest” means an ownership interest in an entity whereby the interest holder:

1. is required to consolidate the assets, liabilities, income, expenses and cash flows of the entity on a line-by-line basis, in accordance with an acceptable financial accounting standard, or
2. would have been required to do so if the interest holder had prepared consolidated financial statements.

“covered taxes” is defined in section 111T.

“deferred tax expense” is the amount of the net movement in the deferred tax assets and deferred tax liabilities of a constituent entity between the beginning and end of the fiscal year.

“designated filing entity” is the constituent entity, other than the ultimate parent entity, that has been appointed by the MNE group or large-scale domestic group to fulfil the filing obligations set out in section 111AAI on behalf of the MNE group or the large-scale domestic group.

“Directive” means Council Directive 2022/2523 of 15 December 2022 on ensuring a global minimum level of taxation for multinational groups and large-scale domestic groups in the Union.

“disqualified refundable imputation tax” is any tax, other than a qualified imputation tax, accrued, or paid by a constituent entity that is:

1. refundable to the beneficial owner of a dividend distributed by such constituent entity in respect of that dividend or creditable by the beneficial owner against a tax liability other than a tax liability in respect of such dividend, or
2. refundable to the distributing company upon distribution of a dividend to a shareholder.

“domestic top-up tax” means a tax arising pursuant to section 111AAC.

“EEA Agreement” means the Agreement on the European Economic Area signed at Oporto on 2 May 1992 as adjusted by all subsequent amendments to that Agreement.

“EEA state” means a state which is a contracting party to the EEA Agreement.

“eligible distribution tax system” means a corporate income tax system that was in force on or before 1 July 2021, that imposes tax at a rate equal to, or in excess of, the minimum tax rate, and imposes income tax on profits only when those profits are distributed or deemed to be distributed to shareholders, or when the company incurs certain non-business expenses.

“entity” means:

1. any legal arrangement of whatever nature or form that prepares separate financial accounts, or
2. any legal person other than an individual,

but does not include central, state or local government, or their administration or agencies that carry out government functions.

“excluded entities” is defined in section 111C.

“financial accounting net income or loss” is the net income or loss determined for a constituent entity in preparing consolidated financial statements of the ultimate parent entity for a fiscal year before any consolidation adjustments eliminating intra-group transactions.

“filing constituent entity” is an entity filing a top-up tax information return in accordance with section 111AAI.

“fiscal year” is:

1. the accounting period in respect of which the ultimate parent entity of an MNE group or of a large-scale domestic group prepares its consolidated financial statements, or
2. in the absence of such consolidated financial statements, the calendar year.

“flow-through entity” is an entity to the extent that it is fiscally transparent with respect to its income, expenditure, profit or loss in the jurisdiction where it was created unless it is tax resident and subject to a covered tax on its income or profit in another jurisdiction.

“governmental entity” is an entity that:

1. is part of, or wholly-owned by a government (including any political subdivision or local authority thereof),
2. does not carry on a trade or business and has the principal purpose of:
   1. fulfilling a government function, or
   2. managing or investing that government’s or jurisdiction’s assets through the making and holding of investment, asset management, and related investment activities for that government’s jurisdiction’s assets,
3. is accountable to a government on its overall performance, and provides annual information reporting to that government, and
4. its assets vest in a government upon dissolution and, to the extent that it distributes net earnings, such net earnings are distributed solely to that government with no portion of its net earnings inuring to the benefit of any private person.

“group” means

1. all entities which are related through ownership or control for the purpose of the preparation of consolidated financial statements by the ultimate parent entity, including any entity that is excluded from the consolidated financial statements of the ultimate parent entity solely based on its small size, on materiality grounds, or on the grounds that it is held for sale, or
2. an entity that has one or more permanent establishments, provided that the entity is not part of another group referred to in paragraph (a).

“hybrid entity” means—

1. an entity not treated as fiscally transparent in the jurisdiction where it is located but as fiscally transparent in the jurisdiction in which its owner is located, or
2. an entity which is located in a jurisdiction that does not have a corporate income tax and the entity:
   1. is treated as fiscally transparent in the jurisdiction where its owner is located, and
   2. is not treated as a flow-through entity and a tax transparent entity under subsection (5)(c).

“income inclusion rule” means the rules laid down in the Directive or, as regarding third country jurisdictions, the OECD Model Rules in accordance with which the parent entity of an MNE group or of a large-scale domestic group calculates and pays its allocable share of top-up tax in respect of the low-taxed constituent entities of that group.

“IIR” means the income inclusion rule.

“IIR top-up tax” means a tax arising pursuant to subsection (1) or (2) of section 111E, subsection (1) or (2) of section 111F, subsection (1) or (2) of section 111G or subsection (1) or (2) of section 111H, as the case may be.

“insurance investment entity” means an entity that would meet the definition of an investment fund or a real estate investment vehicle, if it had not been established in relation to liabilities under an insurance or annuity contract and if it were not wholly owned by an entity that is subject to regulation in the jurisdiction where it is located as an insurance company.

“intermediate parent entity” means a constituent entity that owns, directly or indirectly, an ownership interest in another constituent entity in the same MNE group or large-scale domestic group, and is not an ultimate parent entity, a partially-owned parent entity, a permanent establishment or an investment entity.

“International Financial Reporting Standards” means International Financial Reporting Standards as adopted by the Union pursuant to Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards.

“international organisation” means an intergovernmental organisation, including a supranational organisation, or wholly-owned agency or instrumentality thereof, that is comprised primarily of governments, has in effect a headquarters or substantially similar agreement with the jurisdiction in which it is established, such as arrangements that entitle the organisation’s offices or establishments in that jurisdiction to privileges and immunities, and that law or its governing documents prevent its income inuring to the benefit of any private person.

“investment entity” is:

1. an investment fund or a real estate investment vehicle,
2. an entity that is at least 95 per cent owned, directly by an investment fund or a real estate investment vehicle or through a chain of such entities, and that operates exclusively or almost exclusively to hold assets or invest funds for their benefit,
3. an entity where a minimum of 85 per cent of its value is owned by an investment fund or a real estate investment vehicle provided that substantially all of its income is derived from dividends or equity gains or losses that are excluded from the calculation of the qualifying income or loss for the purposes of this Part; or
4. an insurance investment entity.

“investment fund” is an entity or arrangement that:

1. is designed to pool financial or non-financial assets from a number of investors, some of which are not connected,
2. invests in accordance with a defined investment policy,
3. allows investors to reduce transaction, research and analytical costs or to spread risk collectively,
4. has as its main purpose the generation of investment income or gains, or protection against a particular or general event or outcome,
5. its investors have a right to return from the assets of the fund or income earned on those assets, based on the contribution they made,
6. is, or its management, is subject to the regulatory regime, including appropriate anti-money laundering and investor protection regulation for investment funds in the jurisdiction in which it is established or managed, and
7. is managed by investment fund management professionals on behalf of the investors.

“joint venture”, “joint venture affiliate” and “joint venture group” have the meaning assigned, respectively, to them by section 111AO.

“large-scale domestic group” is a group of which all constituent entities are located in the same Member State and ‘member of a large-scale domestic group’ shall be construed accordingly.

“local tangible assets” means immovable property located in the same jurisdiction as the constituent entity and that jurisdiction shall be referred to in this Part as the ‘local tangible asset jurisdiction’.

“low-tax jurisdiction” means, in respect of an MNE group or of a large-scale domestic group in any fiscal year, a Member State or a third country territory in which the MNE group or the large-scale domestic group has qualifying income and is subject to an effective tax rate which is lower than the minimum tax rate.

“low-taxed constituent entity” is:

1. a constituent entity of an MNE group or large-scale domestic group that is located in a low-tax jurisdiction, or
2. a stateless constituent entity that, in respect of a fiscal year, has qualifying income and an effective tax rate which is lower than the minimum tax rate.

“main entity” is an entity that includes the financial accounting net income or loss of a permanent establishment in its financial statements.

“marketable transferable tax credit” is defined in section 111V.

“material competitive distortion” means, in respect of the application of a specific principle or procedure under a set of generally acceptable accounting principles, an application that results in an aggregate variation of income or expense of more than €75,000,000 in a fiscal year as compared to the amount that would have been determined by applying the corresponding principle or procedure under International Financial Reporting Standards.

“Member State” means a member state of the European Union.

“minimum tax rate” is 15 per cent.

“MNE” means multinational enterprise.

“MNE group” means a group that includes at least one entity or permanent establishment which is not located in the jurisdiction of the ultimate parent entity and ‘member of an MNE group’ shall be construed accordingly.

“net book value of tangible assets” means the average of the beginning and end values of tangible assets after taking into account accumulated depreciation, depletion and impairment, as recorded in the financial statements.

“non-marketable transferable tax credit” has the meaning assigned to it in section 111V.

“non-profit organisation” is an entity that meets all of the following criteria:

1. it is established and operated in its jurisdiction of residence:
   1. exclusively for religious, charitable, scientific, artistic, cultural, athletic, educational, or other similar purposes, or
   2. as a professional organisation, business league, chamber of commerce, labour organisation, agricultural or horticultural organisation, civil league, or an organisation operated exclusively for the promotion of social welfare,
2. substantially all the income from the activities mentioned in paragraph (a) is exempt from income tax in its jurisdiction of residence,
3. it has no shareholders or members who have a proprietary or beneficial interest in its income or assets,
4. the income or assets of the entity may not be distributed to, or applied for the benefit of, a private person or non-charitable entity other than-
   1. pursuant to the conduct of the entity’s charitable activities,
   2. as payment of reasonable compensation for services rendered or for the use of property or capital, or
   3. as payment representing the fair market value of property which the entity has purchased,
5. upon termination, liquidation or dissolution of the entity, all of its assets are to be distributed or revert to a non-profit organisation or to the government (including any government entity) of the entity’s jurisdiction of residence or any political subdivision thereof, and
6. it does not carry on a trade or business that is not directly related to the purposes for which it was established.

“non-qualified refundable tax credit” means a tax credit that is not a qualified refundable tax credit but that is refundable in whole or in part.

“OECD Model Rules” means the document entitled OECD (2021), Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two): Inclusive Framework on BEPS, OECD OECD/G20 Base Erosion and Profit Shifting, OECD Publishing, Paris, approved on 14 December 2021 by the OECD / G20 Inclusive Framework on BEPS.

“OECD Model Tax Convention on Income and Capital” means the Model Tax Convention on Income and on Capital as published by the OECD on 21 November 2017.

“ownership interest” means any equity interest that carries rights to the profits, capital, or reserves of an entity, or of a permanent establishment.

“parent entity” is:

1. an ultimate parent entity other than an excluded entity,
2. an intermediate parent entity, or
3. a partially-owned parent entity.

“partially-owned parent entity” is a constituent entity that is not an ultimate parent entity, a permanent establishment or an investment entity that owns, directly or indirectly, an ownership interest in another constituent entity of the same MNE group or large-scale domestic group, for which more than 20 per cent of the ownership interest in it is held by one or several persons that are not constituent entities of that MNE group or large-scale domestic group.

“pension fund” means:

1. an entity that is established and operated in a jurisdiction exclusively or almost exclusively to administer or provide retirement benefits and ancillary or incidental benefits to individuals where:
   1. that entity is regulated by that jurisdiction or one of its political subdivisions or local authorities, or
   2. those benefits are secured or otherwise protected by national regulations and funded by a pool of assets held through a fiduciary arrangement or trustor to secure the fulfilment of the corresponding pension obligations against a case of insolvency of the MNE group or large-scale domestic group,

   or

2. a pension services entity.

“pension services entity” means an entity that is established and operated exclusively or almost exclusively to invest funds for the benefit of an entity referred to in paragraph (a) of the definition of pension fund, or to carry out activities that are ancillary to the regulated activities referred to in paragraph (a) of the definition of pension fund, where the pension services entity forms part of the same group as the entities carrying out those regulated activities.

“permanent establishment” means—

1. a place of business or a deemed place of business located in a jurisdiction where it is treated as a permanent establishment in accordance with a tax treaty provided that such jurisdiction taxes the income attributable to it, that income being attributable to it in accordance with a provision drafted in a like manner to Article 7 of the OECD Model Tax Convention on Income and Capital,
2. if there is no tax treaty, a place of business or a deemed place of business located in a jurisdiction which taxes the income attributable to such place of business on a net basis in a manner similar to which it taxes its own tax residents,
3. if a jurisdiction has no corporate income tax system, a place of business or a deemed place of business located therein that would be treated as a permanent establishment in accordance with the OECD Model Tax Convention on Income and Capital, provided that such jurisdiction would have had the right to tax the income that would have been attributable to the place of business, or
4. a place of business or a deemed place of business, that is not described above, through which operations are conducted outside the jurisdiction where the entity is located if such jurisdiction exempts the income attributable to such operations;

“qualified domestic top-up tax” means a top-up tax that is implemented in the domestic law of a jurisdiction provided that such jurisdiction does not provide any benefits that are related to those rules, and that:

1. provides for the determination of the excess profits of the constituent entities located in that jurisdiction in accordance with the rules laid down in the Directive or, as regards third country jurisdictions, the OECD Model Rules, and the application of the minimum tax rate to those excess profits for the jurisdiction and the constituent entities in accordance with the rules laid down in the Directive or, as regards third country jurisdictions, the OECD Model Rules, and
2. is administered in a way that is consistent with the rules laid down in the Directive, or OECD Model Rules as regards third countries;

“qualified domestic top-up tax payable” means the amount accrued by the constituent entities in a jurisdiction in respect of qualified domestic top-up tax for a fiscal year, except that such amount shall not include any amount of qualified domestic top-up tax that:

1. the MNE group or large-scale domestic group directly or indirectly challenges in a judicial or administrative proceeding, or
2. the tax authority of the jurisdiction has determined is not assessable or collectible,

based on—

1. constitutional grounds,
2. other superior law, or
3. a specific agreement with the government of the qualified domestic top-up tax jurisdiction limiting the MNE group’s or large-scale domestic group’s tax liability, such as a tax stabilisation agreement, investment agreement or similar agreement

“qualified IIR” means a set of rules implemented in the domestic law of a jurisdiction, provided that such jurisdiction does not provide any benefits that are related to those rules, and is equivalent to the rules laid down in the Directive, or OECD Model Rules as regards third countries, in accordance with which the parent entity of an MNE group or of a large-scale domestic group calculates and pays its allocable share of top-up tax in respect of the low-taxed constituent entities of that group, and is administered in a way that is consistent with the rules laid down in the Directive or OECD Model Rules.

“qualified imputation tax” shall be construed in accordance with subsection (6).

“qualified refundable tax credit” means a refundable tax credit, or portion thereof, that is designed such that it is to be paid as a cash payment or a cash equivalent to a constituent entity within four years from the date when the constituent entity is entitled to receive the refundable tax credit under the laws of the jurisdiction granting the credit but does not include any amount of tax creditable or refundable pursuant to a qualified imputation tax or a disqualified refundable imputation tax.

“qualified UTPR” means a set of rules implemented in the domestic law of a jurisdiction that is equivalent to the rules laid down in the Directive, or OECD Model Rules as regards third countries, provided that such jurisdiction does not provide any benefits that are related to those rules, in accordance with which a jurisdiction collects its allocable share of top-up tax of an MNE group that was not charged under the IIR in respect of the low-taxed constituent entities of that MNE group, and is administered in a way that is consistent with the rules laid down in the Directive or OECD Model Rules.

“qualifying competent authority agreement” means a bilateral or multilateral agreement or arrangement between two or more competent authorities that provides for the automatic exchange of top-up tax information returns.

“qualifying entity” shall be construed in accordance with section 111AAB.

“qualifying income or loss” has the meaning assigned to it in section 111O(1).

“real estate investment vehicle” means a widely held entity that holds predominantly immovable property, and is subject to a tax system which is designed to achieve a single level of taxation on the income gains or profits of the entity, either at the level of the entity or at the level of its interest holders, with any deferral of taxation on such income, gains or profits being no more than one year from the end of the accounting period in which the income, profits or gains arise.

“securitisation arrangement” means an arrangement that:

1. is implemented for the purpose of pooling and repackaging a portfolio of assets, or exposures to assets, for investors that are not constituent entities of the MNE group, which is undertaking the arrangement, in a manner that legally segregates one or more than one identified pool of assets, and
2. seeks through contractual agreements to limit the exposure of the investors referred to in paragraph (a) to the risk of insolvency of an entity holding the legally segregated assets by controlling the ability of identified creditors of that entity, or of another entity in the arrangement, to make claims against it through legally binding documentation entered into by those creditors;

“securitisation entity” shall be construed in accordance with subsection (8);

“stateless constituent entity” is a constituent entity to which subsection (3)(b), (4)(d) or (6)(d)(i) of section 111D applies.

“substance-based income exclusion amount” is defined in section 111AE (2)(a).

“tax treaty” means an agreement for the avoidance of double taxation with respect to taxes on income and on capital.

“third country jurisdiction” means a jurisdiction that is not a Member State.

“top-up tax” means the top-up tax calculated for a jurisdiction or a constituent entity pursuant to section 111AD.

“ultimate parent entity” is:

1. an entity that owns, directly or indirectly, a controlling interest in any other entity and that is not owned, directly or indirectly, by another entity with a controlling interest in it, or
2. a main entity of a group as defined in paragraph (b) of the definition of “group” in this section;

“undertaxed profit rule” means the rules laid down in the Directive or, as regards third country jurisdictions, the OECD Model Rules, in accordance with which a jurisdiction collects its allocable share of top-up tax of an MNE group that was not charged under the qualified IIR in respect of the low-taxed constituent entities of that MNE group.

“UTPR” means the undertaxed profit rule.

“UTPR top-up tax” means a tax arising pursuant to section 111L(1), 111M(1) or 111AZ(1), as the case may be.

Meaning of connected person

(2) For the purposes of this Part, a person or entity is connected with another person or entity if they are “closely related” within the meaning of Article 5(8) of the OECD Model Tax Convention on Income and Capital, which provides:

“…a person or enterprise is closely related to an enterprise if, based on all the relevant facts and circumstances, one has control of the other or both are under the control of the same persons or enterprises. In any case, a person or enterprise shall be considered to be closely related to an enterprise if one possesses directly or indirectly more than 50 per cent of the beneficial interest in the other (or, in the case of a company, more than 50 per cent of the aggregate vote and value of the company’s shares or of the beneficial equity interest in the company) or if another person or enterprise possesses directly or indirectly more than 50 per cent of the beneficial interest (or, in the case of a company, more than 50 per cent of the aggregate vote and value of the company’s shares or of the beneficial equity interest in the company) in the person and the enterprise or in the two enterprises.”

Meaning of fiscally transparent

(3) For the purposes of this Part, an entity is fiscally transparent where its income, expenditure, profit or loss is treated by the laws of a jurisdiction as if it were derived or incurred by the direct owner of that entity in proportion to its interest in that entity.

Controlling interest

(4) For the purpose of the definition of “controlling interest” a main entity is deemed to have the controlling interest of its permanent establishments.

Flow-through entity

(5) This subsection details the categorisation of a “flow-through entity”:

(5)(a) A flow-through entity is:

1. a tax transparent entity to the extent that it is fiscally transparent in the jurisdiction in which its owner it located, and
2. a reverse hybrid entity to the extent that it is not fiscally transparent in the jurisdiction in which its owner it located.

(5)(b) An ownership interest in an entity or a permanent establishment that is a constituent entity shall be treated as held through a tax transparent structure if that ownership interest is held indirectly through a chain of tax transparent entities.

(5)(c) A constituent entity that:

• is not tax resident in any jurisdiction, and
• is not subject to a covered tax or a qualified domestic top-up tax based on its place of management, place of creation or similar criteria,

shall be treated as a flow-through entity and a tax transparent entity in respect of its income, expenditure, profit or loss, to the extent that:

1. its owners are located in a jurisdiction that treats the entity as fiscally transparent,
2. it does not have a place of business in the jurisdiction where it was created, and
3. its income, expenditure, profit or loss is not attributable to a permanent establishment.

(5A) For the purposes of applying subsection (5)(a) to a flow-through entity, a reference in that subsection to “owner” means the constituent entity-owner that is closest in the ownership chain to the flow-through entity that is either:

• not a flow-through entity, or
• where there is no such constituent entity-owner, a flow-through entity that is the ultimate parent entity of the MNE group or large-scale domestic group.

Qualified imputation tax

(6)(a) This subsection provides that a qualified imputation tax means a covered tax accrued or paid by a constituent entity, including a permanent establishment, that is refundable or creditable to the beneficial owner of the dividend distributed by the constituent entity or, in the case of a covered tax accrued or paid by a permanent establishment, a dividend distributed by the main entity, to the extent that the refund is payable, or the credit is provided:

• by a jurisdiction other than the jurisdiction which imposed the covered taxes,
• to a beneficial owner of the dividend that is subject to tax at a nominal rate that equals or exceeds the minimum tax rate on the dividend received under the domestic law of the jurisdiction which imposed the covered taxes on the constituent entity,
• to an individual who is the beneficial owner of the dividend and tax resident in the jurisdiction which imposed the covered taxes on the constituent entity and who is subject to tax at a nominal rate that equals or exceeds the standard tax rate applicable to ordinary income, or
• to a governmental entity, an international organisation, a resident non-profit organisation, a resident pension fund, a resident investment entity that is not part of an MNE group or a large-scale domestic group or a resident life insurance company to the extent that the dividend is received in connection with resident pension fund activities, and is subject to tax in a similar manner as a dividend received by a pension fund.

(6)(b) For the purposes of paragraph (a):

• a non-profit organisation or pension fund is resident in a jurisdiction if it is created and managed in that jurisdiction,
• an investment entity is resident in a jurisdiction if it is created and regulated in that territory, and
• a life insurance company is resident in the jurisdiction in which it is located;

(7) Subsection (7) provides that any words or expressions used in this Part, which are also used in the Directive, will have the same meaning in this Part as it has in the Directive unless the context otherwise requires.

(8)(a) Subject to paragraph (b) of subsection (8), for the purposes of Part 4A, “securitisation entity” means an entity which is a participant in a securitisation arrangement, that:

• solely carries out activities that facilitate one or more than one securitisation arrangement,
• grants security over its assets in favour of its creditors, or the creditors of another securitisation entity, and
• pays out all cash received from its assets to its creditors, or the creditors of another securitisation entity, on an annual or more frequent basis, other than:
  • cash retained to meet an amount of profit required by the documentation of the securitisation arrangement for eventual distribution to equity holders or their equivalent, where the entity is not a company, or
  • cash reasonably required under the terms of the securitisation arrangement to:
    • make provision for future payments which are required, or will likely be required, to be made by the entity under the terms of the securitisation arrangement, or
    • maintain or enhance the creditworthiness of the entity

(8)(b) An entity shall not be a securitisation entity unless any profit required by the documentation of the securitisation arrangement for eventual distribution to equity holders or their equivalent, where the entity is not a company, for a given fiscal year is negligible relative to the revenues of that entity.

Relevant Date: Finance Act 2024