I move amendment No. 100:
In page 38, to delete lines 39 to 41, to delete pages 39 to 41, and in page 42, to delete lines 1 to 12 and substitute the following:
“(a) in section 739B(1) by substituting “In this Chapter, in Chapter 1B and in Schedules 2B and 2C” for “In this Chapter and in Schedule 2B”,
(b) by inserting after Chapter 1A the following:
“CHAPTER 1B
Irish real estate funds
Interpretation
739K. (1)In this Chapter—
‘accounting period’ means the period for which an investment undertaking or sub-fund, as the case may be, makes up its accounts and subsections (2) and (3) of section 27 shall have application for the purposes of determining the accounting period of an investment undertaking or sub-fund;
‘accrued IREF profits’ means the IREF profits that have arisen and accrued to a unit since that unit was acquired by the person who, on the happening of an IREF taxable event, is the unit holder;
‘arrangement’ includes any agreement, understanding, scheme, course of action, course of conduct, transaction or series of transactions;
‘connected’ has the meaning assigned to it in section 10;
‘EEA state’ means a state, not being a Member State or the State, which is a contracting party to the Agreement on the European Economic Area signed at Oporto on 2 May 1992 as adjusted by the Protocol signed at Brussels on 17 March 1993;
‘income statement’ means the profit and loss account, income statement or equivalent prepared in respect of an investment undertaking or sub-fund, as the case may be, in accordance with international accounting standards or alternatively in accordance with the generally accepted accounting practice specified in the investment undertaking’s prospectus;
‘IREF’ means an investment undertaking or, where that investment undertaking is an umbrella scheme, a sub-fund of an investment undertaking—
(a) in which 25 per cent or more of the value of the assets at the end of the immediately preceding accounting period is derived directly or indirectly from IREF assets, or
(b) where paragraph (a) does not apply, it would be reasonable to consider that the main purpose, or one of the main purposes, of the investment undertaking or the sub-fund, as the case may be, was to acquire IREF assets or to carry on an IREF business,
other than an investment undertaking within the meaning of paragraph (b) of the definition of ‘investment undertaking’ in section 739B, and where this Chapter applies to a sub-fund of an umbrella scheme, for the purposes of the calculation, assessment and collection of any tax due under this Chapter, each sub-fund of such umbrella scheme shall be treated as a separate legal person;
‘IREF assets’ means one or more of the following held by an IREF:
(a) relevant assets (within the meaning of section 29(1A));
(b) shares in a REIT (within the meaning of Part 25A);
(c) shares deriving their value or the greater part of their value directly or indirectly from the assets referred to in paragraph (a) or (b), other than shares quoted on a stock exchange except as provided for in paragraph (b) of this definition;
(d) specified mortgages, other than those which—
(i) are issued by a qualifying company as part of a CLO transaction, a CMBS/RMBS transaction or a loan origination business (each within the meaning of section 110), or
(ii) form part of a loan origination business of the IREF;
(e) units in an IREF;
‘IREF business’ means activities involving IREF assets, the profits or gains of which, apart from section 739C, would be chargeable to income tax, corporation tax or capital gains tax, including, but without limitation to the generality of the preceding words, activities which would be regarded as—
(a) dealing in or developing land, or
(b) a property rental business;
‘IREF excluded profits’ means—
(a) in relation to IREF assets (other than those referred to in paragraphs (b) to (e) of the definition of ‘IREF assets’)—
(i) any profits or gains as shown in the income statement of the IREF in relation to the disposal of those assets where—
(I) such asset was acquired otherwise than through a transaction in respect of which relief was availed of under section 615 or 617,
(II) such asset was held by the IREF, or an investment undertaking of which the IREF is a sub-fund, for a period of at least 5 years from the date on which it was acquired, and
(III) the disposal of such asset would, but for section 739C, be a chargeable gain subject to capital gains tax or corporation tax on chargeable gains,
(ii) any unrealised profits or gains as shown in the income statement of the IREF in relation to those assets where—
(I) such asset was acquired otherwise than through a transaction in respect of which relief was availed of under section 615 or 617, and
(II) the disposal of such asset would, but for section 739C, be a chargeable gain subject to capital gains tax or corporation tax on chargeable gains,
(b) in relation to shares, within the meaning of paragraph (c) of the definition of ‘IREF assets’, any distribution made in relation to those shares, and
(c) in relation to shares, within the meaning of paragraph (b) of the definition of ‘IREF assets’, any profits or gains other than property income dividends in relation to those shares;
‘IREF profits’ means the profits and gains of an IREF business as shown in the income statement of the IREF, any amount of the profits and gains realised on the disposal of an IREF asset (other than those referred to in paragraphs (b) to (e) of the definition of ‘IREF assets’) not otherwise shown in the income statement and excluding IREF excluded profits;
‘IREF taxable amount’, in relation to an IREF taxable event and a unit holder, means an amount calculated in accordance with section 739L;
‘IREF taxable event’ in respect of a unit holder means—
(a) the making of a relevant payment,
(b) the cancellation, redemption or repurchase of units from a unit holder, including on a liquidation,
(c) any exchange by a unit holder of units in a sub-fund of an investment undertaking for units in another sub-fund of that investment undertaking,
(d) the issuing of units as paid-up, otherwise than by the receipt of new consideration,
(e) an IREF ceasing to be an IREF including on it ceasing to be an investment undertaking or on it ceasing to have 25 per cent of its value derived from IREF assets,
(f) the disposal of a unit by a unit holder, other than in circumstances that would give rise to an IREF taxable event under paragraph (b) or (c), or
(g) the sale or transfer of the right to receive any of the accrued IREF profit without the sale or transfer of the unit to which the accrued IREF profit relates or where the accrued IREF profit in respect of the unit becomes receivable otherwise than by the unit holder;
‘IREF withholding tax’, in relation to an IREF taxable event, means a sum representing income tax at a rate of 20 per cent on the IREF taxable amount;
‘purchased IREF profits’ means the IREF profits which have arisen and accrued to a unit prior to that unit being acquired by the unit holder;
‘relevant payment’, means a payment including a distribution, whether in cash or non-cash, made to a unit holder by an IREF by reason of the rights conferred to the unit holder as a result of holding a unit or units in the IREF, other than a payment made in respect of the cancellation, redemption or repurchase of a unit;
‘specified person’ means a unit holder in respect of which a gain is not treated as arising to an investment undertaking on the happening of a chargeable event under subsection (6), (7), (7A) (as it applies to a declaration made under subsection (6) or (7)), (7B) (as it applies to a declaration made under subsection (7) or (9)), (8), (8A), (8D), (8E), (9) or (9A) of section 739D, but shall not, subject to 739M, include—
(a) a fund approved under section 774, 784(4) or 785(5), a PRSA within the meaning of section 787A, or a person exempt from income tax under section 790B,
(b) an investment undertaking,
(c) a company carrying on life business (within the meaning of section 706),
(d) a person who is exempt from—
(i) income tax under Schedule D by virtue of section 207(1)(b), or
(ii) corporation tax by virtue of section 207(1)(b) as it applies for the purposes of corporation tax under section 76(6),
(e) a credit union,
(f) a scheme, undertaking or company equivalent to those referred to in paragraphs (a) to (c), authorised by a Member State or an EEA state and subject to supervisory and regulatory arrangements at least equivalent to those applied to those schemes, undertakings or companies, as the case may be, in the State, or
(g) a qualifying company, within the meaning of section 110,
where the IREF is in possession of a valid declaration, in accordance with Schedule 2C, immediately before the IREF taxable event;
‘TIN’ has the meaning assigned to it in section 891F and includes a tax reference number as defined in section 891B;
‘umbrella scheme’ has the meaning given to it in section 739B.
(2) In calculating the portion of the value of assets of an investment undertaking or sub-fund attributable to IREF assets for the purposes of determining whether or not an investment undertaking or sub-fund is an IREF—
(a) account shall not be taken of any arrangement that—
(i) involves a transfer of assets, other than IREF assets, from a person connected with—
(I) the investment undertaking or sub-fund, as the case may be,
or
(II) a unit holder in the investment undertaking or sub-fund, and
(ii) the main purpose or one of the main purposes of which is the avoidance of tax under this Chapter,
and
(b) regard shall be had to the gross value of the assets of which the IREF asset is part.
Calculating the IREF taxable amount
739L. The IREF taxable amount in relation to an IREF taxable event shall be calculated as:
A x B-D
C
where—
A is the portion of the IREF taxable event which is attributable to the retained profits of the IREF,
B is the portion of the retained profits of the IREF attributable to the IREF business, or a business which would be considered an IREF business if it was carried on after 1 January 2017,
C is the retained profits of the IREF, excluding any amounts referred to in paragraph (b) of the definition of ‘IREF excluded profits’,
D is the purchased IREF profits not previously distributed by the IREF.
Anti-avoidance: multiple funds
739M. (1)In this Chapter—
‘personal portfolio IREF’ means an IREF under the terms of which some or all of the IREF assets or IREF business may be, or was, selected or influenced by—
(a) the unit holder,
(b) a person acting on behalf of the unit holder,
(c) a person connected with the unit holder,
(d) a person connected with a person acting on behalf of the unit holder,
(e) the unit holder and a person connected with the unit holder, or
(f) a person acting on behalf of both the unit holder and a person connected with the unit holder.
(2) For the purposes of subsection (1) and without prejudice to the application of that subsection, the terms of an IREF shall be treated as permitting the selection referred to in that subsection where—
(a) the terms of that IREF or any other agreement between any person referred to in that subsection and that IREF—
(i) allow the exercise of an option by any person referred to in that subsection to make the selection referred to in that subsection,
(ii) gives that IREF discretion to offer any person referred to in that subsection the right to make the selection referred to in that subsection, or
(iii) allow any of the persons referred to in that subsection the right to request, subject to the agreement of that IREF, a change in those terms such that the selection referred to in that subsection may be made by any of those persons,
or
(b) the unit holder or any person connected with the unit holder has or had the option of requiring that IREF to appoint an investment advisor (regardless how such a person is described) in relation to the selection of IREF assets or business, or the conduct of the IREF business.
(3) A scheme, undertaking or company, as referred to in paragraphs (a) to (c) or (f) of the definition of ‘specified person’ in section 739K, shall be a specified person where—
(a) the IREF is a personal portfolio IREF in respect of any of the unit holders, or
(b) (i) that scheme, undertaking or company, as the case may be, would, if it was an IREF and if the holding of the units in the IREF was part of its IREF business, be regarded as a personal portfolio IREF in respect of any of its unit holders, and
(ii) it would be reasonable to consider that the investment in the IREF by the scheme, undertaking or company was part of a scheme or arrangement the main purpose, or one of the main purposes, of which was the avoidance of tax under this Chapter.
Anti-avoidance: profit stripping
739N. (1) Where—
(a) an IREF taxable event in relation to a personal portfolio IREF derives some of its value from profits referred to in paragraph (a) (ii) of the definition of ‘IREF excluded profits’ (in this section referred to as ‘unrealised profits’), and
(b) the asset to which those profits relate is subsequently disposed of in a manner that the profits or gains do not fall within paragraph (a)(i) of the definition of ‘IREF excluded profits’,
then the disposal of that asset shall be an IREF taxable event and the IREF will be required to pay to the Revenue Commissioners, not later than 30 days after the date of that disposal, an amount equal to the IREF withholding tax on the portion of the unrealised profits the value of which has already been realised by the unit holders through past IREF taxable events.
(2) An amount of IREF withholding tax due under this section shall be included in the return required under section 739R.
Tax arising on IREF taxable event
739O. (1)In this section a ‘holder of excessive rights’ means a person who is beneficially entitled, directly or indirectly, to at least 10 per cent of the units in an IREF.
(2) Notwithstanding any other provision of the Tax Acts—
(a) for the purposes of affording relief under an arrangement made with the government of a territory outside the State having the force of law under the procedures set out in section 826(1), the IREF taxable amount in respect of an IREF taxable event and a unit holder—
(i) who is a holder of excessive rights, is income from immovable property, and
(ii) who is not a holder of excessive rights, shall be treated as a dividend,
(b) in respect of a unit holder, the IREF taxable amount shall be chargeable to income tax under Case V of Schedule D and shall be treated as income—
(i) arising in the year of assessment in which the IREF taxable event occurs, and
(ii) against which no loss, deficit, expense or allowance may be set off,
(c) to the extent to which profits or gains of a basis period for a year of assessment consist of profits or gains to which this Chapter applies, those profits or gains—
(i) shall be chargeable to income tax for that year, subject to section 739Q, at the rate of 20 per cent, and
(ii) shall not be reckoned in computing total income for that year for the purposes of the Income Tax Acts,
and
(d) the provisions of section 188, and the reductions specified in Part 2 of the Table to section 458 shall not apply as regards income tax so charged.
Withholding tax arising on IREF taxable event
739P. (1) On the happening of an event mentioned in paragraphs (a) to (e) of the definition of ‘IREF taxable event’ in respect of a specified person—
(a) the IREF shall deduct IREF withholding tax out of the IREF taxable amount,
(b) the specified person shall allow such deduction referred to in paragraph (a) on the receipt of the residue of the IREF taxable amount, and
(c) the IREF shall be acquitted and discharged of so much money as is represented by the deduction referred to in paragraph (a) as if that amount of money had actually been paid to the specified person.
(2) On the happening of an event mentioned in paragraph (d) of the definition of ‘IREF taxable event’ in respect of a specified person, to satisfy the requirements of paragraphs (a) and (b) of subsection (1), the IREF shall reduce the amount of the additional units to be issued to the specified person by such amount as will secure that the value at that time of the additional units issued to the specified person does not exceed an amount equal to the amount which the person would have received, after deduction of IREF withholding tax, if the person had received the value of the IREF taxable event in cash instead of in the form of additional units in the IREF.
(3) Where the IREF taxable event consists of a non-cash amount, the IREF—
(a) shall be liable to pay to the Collector-General an amount (which shall be treated for the purposes of this Chapter as if it were a deduction of IREF withholding tax in relation to an IREF taxable event) equal to the IREF withholding tax which, but for this subsection, would have been required to be deducted from the amount of the IREF taxable amount,
(b) shall be liable to pay that amount in the same manner in all respects as if it were the IREF withholding tax which, but for this subsection, would have been required to be deducted from the IREF taxable amount, and
(c) shall be entitled to recover a sum equal to that amount from the specified person as a simple contract debt in any court of competent jurisdiction.
(4) (a) Subject to paragraph (b), the amount of IREF withholding tax deducted in respect of a unit holder in accordance with this section shall be treated as a payment on account of the income tax chargeable on that unit holder on that IREF taxable event for that year of assessment and where that payment on account equals the income tax payable under section 739O, that unit holder shall not, in respect of the IREF taxable event, be regarded as a chargeable person within the meaning of Part 41A.
(b) Where IREF withholding tax is paid in accordance with subsection (3), the unit holder shall not be entitled to treat the IREF withholding tax as a payment on account until such time as the debt to the IREF is repaid.
(5) Other than as otherwise provided for in section 739Q, no repayment of any IREF withholding tax shall be made to any person receiving or entitled to the IREF taxable amount.
Repayment of IREF withholding tax
739Q. (1)In this section, ‘relevant person’ means a specified person, who during an accounting period was subject to withholding tax on an IREF taxable event and would but for section 739P be entitled to a repayment of tax.
(2) Notwithstanding section 739P(5), repayment of IREF withholding tax in respect of an IREF taxable event shall be made to a relevant person to the extent provided for in an arrangement made with the government of a territory outside the State having the force of law under the procedures set out in section 826(1) and the rate of tax specified in section 739O(2)(c) shall be the rate applicable pursuant to the relevant arrangement.
(3) Notwithstanding section 739P(5), where a scheme, undertaking or company, as referred to in paragraphs (a) to (c) or (f) of the definition of ‘specified person’, can prove—
(a) that it has indirectly invested in units of an IREF,
(b) that the IREF would not be regarded as a personal portfolio IREF of that scheme, undertaking or company, and
(c) that an amount of withholding tax was operated on an IREF taxable event to which it is indirectly entitled which is not otherwise repayable,
then that scheme, undertaking or company, as the case may be, shall be entitled to make a claim to the Revenue Commissioners for repayment of that withholding tax in the form prescribed by the Revenue Commissioners and the rate of tax specified in section 739O(2)(c) shall be reduced accordingly.
Returns, payment and collection of IREF withholding tax
739R. (1)Notwithstanding any other provision of the Tax Acts, this section shall apply for the purposes of regulating the time and manner in which IREF withholding tax shall be accounted for and paid.
(2) An IREF shall for each accounting period make to the Collector-General a return, in accordance with subsections (3) and (4), of the IREF withholding tax in connection with an accounting period—
(a) which ends on or before 30 June in a financial year, within 30 days of 31 December of that year, and
(b) which ends between 1 July and 31 December, within 30 days of 30 June of the following year.
(3) The IREF withholding tax which is required to be included in a return referred to in subsection (2) shall be due at the time by which the return is to be made and shall be paid by the IREF to the Collector-General and subsections (3) to (9) of section 739F shall apply to IREF withholding tax, with any required modifications, as they apply to the appropriate tax.
(4) The return referred to in subsection (2) shall contain the following details:
(a) the name and tax reference number of the IREF in respect of which the IREF taxable event occurred;
(b) the name, address, TIN and unit holding of each unit holder in respect of whom the IREF taxable event happened;
(c) the date on which the IREF taxable event occurred;
(d) the amount of the IREF taxable event for each unit holder;
(e) the amount of IREF withholding tax (if any) in relation to the IREF taxable event deducted by the IREF in respect of each unit holder.
Statement to be given to recipients on the making of an IREF relevant payment
739S. (1) Every IREF shall, at the time of the IREF taxable event (within the meaning of paragraphs (a) to (e) of the definition of ‘IREF taxable event’), give the unit holder a statement in writing, or by means of electronic communications, specifying the following details:
(a) the name and address of the IREF;
(b) the name and address of the unit holder;
(c) the date the IREF taxable event occurred;
(d) the IREF taxable amount;
(e) the amount of the IREF withholding tax deducted in relation to the IREF taxable event.
(2) Section 152(2) shall apply to the failure by an IREF to comply with this section, with any necessary modifications.
Deduction from consideration on the disposal of certain units
739T. (1)This section—
(a) applies on the happening of an event specified in paragraph (f) or (g) of the definition of ‘IREF taxable event’, in respect of a specified person, and
(b) shall not apply where the amount or value of any consideration payable in relation to the happening of such an IREF taxable event does not exceed the sum of €500,000; but where the taxable event involves a disposal, sale or transfer by the unit holder in parts—
(i) to the same person, or
(ii) to persons who are acting in concert or who are connected persons,
whether on the same or different occasions, the several disposals, sales or transfers shall, for the purposes of this paragraph, be treated as a single disposal, sale or transfer.
(2) On payment of any consideration in relation to the happening of an IREF taxable event to which this section applies—
(a) the person by or through whom any such payment is made shall deduct from that payment a sum representing an amount of income tax equal to 20 per cent of that payment,
(b) the person to whom the payment is made shall allow such deduction on receipt of the residue of the payment, and
(c) the person making the deduction shall, on proof of payment to the Revenue Commissioners of the amount so deducted, be acquitted and discharged of so much money as is represented by the deduction as if that sum had been actually paid to the person making the disposal.
(3) (a) Notwithstanding any other provision of the Tax Acts, this subsection shall apply for the purposes of regulating the time and manner in which the withholding tax deducted under this section shall be accounted for and paid.
(b) The person who was required to deduct the withholding tax under this section shall, within 30 days of the date of the IREF taxable event, deliver to the Revenue Commissioners an account of the IREF taxable event and of the amount deducted.
(c) The account referred to in paragraph (b) shall contain details of the following:
(i) the name and tax reference number of the IREF in respect of which the IREF taxable event occurred;
(ii) the name, address, TIN and unit holding of the unit holder in respect of whom the IREF taxable event occurred;
(iii) the date on which the IREF taxable event occurred;
(iv) the amount of the consideration paid or payable to the unit holder;
(v) the amount of withholding tax deducted under this section.
(d) Income tax which by virtue of this section is payable by a person shall—
(i) be payable by that person in addition to any income tax which by virtue of any other provision of the Tax Acts is payable by that person,
(ii) be due within 30 days of the IREF taxable event, and
(iii) be payable by that person without the making of an assessment.
(e) Where, in relation to any payment of withholding tax referred to in paragraph (b), any person has made default in delivering an account required by this section, or where the Revenue officer is not satisfied with the account, the officer may estimate the amount of the payment to the best of his or her judgment and, notwithstanding section 18, may assess and charge that person to income tax for the year of assessment in which the payment was made on the amount so estimated at the rate of 20 per cent.
(4) The amount of withholding tax deducted in respect of a unit holder in accordance with this section shall be treated as a payment on account of the income tax chargeable on that unit holder on that IREF taxable event for that year of assessment.
(5) Repayment of withholding tax deducted in respect of a unit holder in accordance with this section in respect of an IREF taxable event shall be made to a relevant person, within the meaning of section 739Q, to the extent provided for in an arrangement made with the government of a territory outside the State having the force of law under the procedures set out in section 826(1) and the rate of tax in section 739O(2)(c) shall be the rate applicable pursuant to the relevant arrangement.
(6) A claim for repayment of any withholding tax deducted under this section which is in excess of the income tax chargeable on the IREF taxable event under section 739O shall be made by the unit holder in a return, made in accordance with Part 41A, and no other repayment of any amount of such withholding tax shall be made.
Retention and examination of documentation
739U. (1) An IREF shall keep and retain declarations made to it in accordance with Schedule 2C for a period of 6 years from the time the unit holder of the units in respect of which the declaration was made ceases to be such a unit holder.
(2) An IREF shall, on being so required by notice in writing given to the IREF by the Revenue Commissioners, make available to the Revenue Commissioners, within the time specified in the notice—
(a) all declarations, certifications or notifications which have been made or, as the case may be, given to the IREF in accordance with Schedule 2C, or
(b) such class or classes of such declarations, certificates or notifications as may be specified in the notice.
(3) The Revenue Commissioners may examine or take extracts from or copies of any declarations, certificates or notifications made available to the Revenue Commissioners under subsection (2).
Transfer of IREF business to a company
739V. (1)In this section—
‘the Acts’ means the Tax Acts and the Capital Gains Tax Acts;
‘specified company’ means a company that is formed under the laws of, and is registered in, a Member State or an EEA state;
‘transferred business’ means the IREF business, the IREF assets and any assets ancillary to the IREF business referred to in subsection (2) (a)(i) or (ii), as the case may be.
(2) This section applies—
(a) where an investment undertaking—
(i) transfers the whole of its IREF business and its IREF assets, including any assets ancillary to the IREF business, or
(ii) which carries out activities which would be regarded as dealing in or developing land and other IREF business, transfers the part of its IREF business and its IREF assets, including any assets ancillary to the IREF business, that relate to dealing in or developing land,
to a specified company which is within the charge to corporation tax in respect of the transferred business and the charge to capital gains tax in respect of any IREF assets the disposal of which would not be within the charge to corporation tax,
(b) (i) where shares in the specified company are issued to the unit holders in the investment undertaking in respect of and in proportion to (or as nearly as may be in proportion to) their unit holdings in the investment undertaking,
(ii) the rights attaching to those shares are equivalent to the rights attaching to the units, and
(iii) the investment undertaking receives no part of the consideration for the transfer referred to in paragraph (a) (otherwise than by the specified company taking over the whole or part of the liabilities of its business),
(c) where upon completion of the transfer referred to in paragraph (a), the investment undertaking has no assets that relate to the transferred business,
(d) where the shares concerned are issued on or before 1 July 2017, and
(e) where the investment undertaking does not carry on any business similar to the transferred business after the date of such transfer referred to in paragraph (a).
(3) Subject to subsection (4), for the purpose of the Acts, in respect of a transfer to which this section applies—
(a) the investment undertaking shall be deemed not to have—
(i) disposed of any asset,
(ii) discontinued any business or trade,
(iii) earned any income, profit or gain on the transfer, or
(iv) distributed any profits to the unit holders by way of the transfer,
(b) the specified company—
(i) shall be deemed, as if it had been in existence since the commencement of the transferred business by the investment undertaking, in relation to the transferred business up to the date of transfer—
(I) to have carried out all activities, incurred all expenses, acquired all assets, borrowed all monies, and monies borrowed at or about the time of the purchase of premises shall be treated as having been employed in the purchase of those premises, and earned all profits and incurred all losses of the investment undertaking, and
(II) to have made all such claims for any allowances, deductions and reliefs as it would have been entitled to had it carried on the transferred business since its commencement,
and shall, after the date of transfer, be subject to tax under the Acts as if it had carried out all transactions carried out by the investment undertaking prior to the transfer, and
(ii) shall be treated as if any assets included in the transfer were acquired by the specified company for consideration of such amount as would secure that on the disposal by means of the transfer neither a gain nor a loss would accrue to the investment undertaking, and for the purposes of the Acts the specified company shall be treated as if the respective acquisitions of the assets by the investment undertaking had been the specified company’s acquisition of the assets,
and
(c) the unit holder shall not be treated as having disposed of the units or as having acquired the shares or any part of them, but the units (taken as a single asset) and the shares (taken as a single asset) shall be treated as the same asset acquired as the units were acquired.
(4) For the purposes of this Chapter, the transfer shall constitute an IREF taxable event but the investment undertaking, a unit holder and the specified company may jointly elect that the tax due under sections 739O and 739P becomes due and payable on the earlier of—
(a) a date not later than 60 days after the disposal of the shares in the specified company,
(b) the tenth anniversary of the date of the transfer,
(c) the appointment of a liquidator to the specified company, or
(d) the specified company ceasing to be resident, under the law of a Member State or an EEA state, in that territory for the purposes of tax,
and the specified company shall, not later than 21 days after the date of the end of each of the calendar years which follow the year in which the transfer occurs, deliver a statement to the Revenue Commissioners, in the prescribed form, providing such information as may be required for the purposes of this subsection.
(5) Any instrument giving effect to a transfer to which this section applies shall be disregarded for the purposes of the Stamp Duties Consolidation Act 1999, and the enactments amending or extending that Act.
Application of Chapter 1A to IREFs
739W. Chapter 1A shall apply to IREFs other than as provided for in this Chapter.
Application of this Chapter
739X. This Chapter shall apply to—
(a) accounting periods commencing on or after 1 January 2017, or
(b) where an investment undertaking’s immediately preceding accounting period ended on or after 31 December 2015 and a decision was made after 20 October 2016 to change the accounting period such that paragraph (a) would not apply, that accounting period commencing on or after 20 October 2016.”,
and
(c) by inserting the following after Schedule 2B:
“SCHEDULE 2C
Sections 739B, 739K and 739U
IRISH REAL ESTATE FUNDS: DECLARATIONS
Interpretation
1. In this Schedule—
‘appropriate person’, in relation to a pension scheme, means—
(a) in the case of an exempt approved scheme (within the meaning of section 774), the administrator (within the meaning of section 770) of the scheme,
(b) in the case of a retirement annuity contract to which section 784 or 785 applies, the person lawfully carrying on in the State the business of granting annuities on human life with whom the contract is made, and
(c) in the case of a trust scheme to which section 784 or 785 applies, the trustees of the trust scheme;
‘IREF declaration’, in relation to a person means the declaration that that person would be required to make under section 739K and Schedule 2C.
Declarations of pension schemes
2. The declaration referred to in section 739K, in respect of a pension scheme referred to in paragraph (a) or (f) of the definition of ‘specified person’, is a declaration in writing to the IREF which—
(a) is made by the person (in this paragraph referred to as the ‘declarer’) entitled to the units in respect of which the declaration is made,
(b) is signed by the declarer,
(c) is made in such form as may be prescribed or authorised by the Revenue Commissioners,
(d) declares that, at the time when the declaration is made, the person entitled to the units is a pension scheme,
(e) contains the name, address and TIN of the pension scheme,
(f) contains a certificate by the appropriate person in relation to the pension scheme that, to the best of that person’s knowledge and belief, the declaration made in accordance with subparagraph (d) and the information furnished in accordance with subparagraph (e) are true and correct,
(g) contains a certificate by the declarer stating whether or not the unit holder is a specified person after the application of section 739M,
(h) attaches, where the scheme is one to which paragraph (f) of the definition of ‘specified person’ applies, supporting documentation evidencing equivalence,
(i) contains an undertaking by the declarer that if the scheme ceases to be a specified person, the declarer will notify the IREF accordingly, and
(j) contains such other information as the Revenue Commissioners may reasonably require for the purposes of Chapter 1B of Part 27.
Declaration of PRSA Administrator
3. The declaration referred to in section 739K, in respect of a PRSA referred to in paragraph (a) or (f) of the definition of ‘specified person’, is a declaration in writing to the IREF which—
(a) is made by a PRSA administrator (in this paragraph referred to as the ‘declarer’) in respect of units which are assets in a PRSA,
(b) is signed by the declarer,
(c) is made in such form as may be prescribed or authorised by the Revenue Commissioners,
(d) declares that, at the time when the declaration is made, the units in respect of which the declaration is made—
(i) are assets of a PRSA, and
(ii) are managed by the declarer for the individual who is beneficially entitled to the units,
(e) contains the name, address and TIN of the individual referred to in subparagraph (d),
(f) contains an undertaking by the declarer that if the units cease to be assets of the PRSA, including a case where the units are transferred to another PRSA, the declarer will notify the IREF accordingly,
(g) contains a certificate by the declarer stating whether or not the unit holder is a specified person after the application of section 739M,
(h) attaches, where the PRSA is one to which paragraph (f) of the definition of ‘specified person’ applies, supporting documentation evidencing equivalence,
(i) contains an undertaking by the declarer that if the PRSA ceases to be a specified person, the declarer will notify the IREF accordingly, and
(j) contains such other information as the Revenue Commissioners may reasonably require for the purposes of Chapter 1B of Part 27.
Declarations of investment undertakings
4. The declaration referred to in section 739K, in respect of an investment undertaking referred to in paragraph (b) or (f) of the definition of ‘specified person’, is a declaration in writing to the IREF which—
(a) is made by the person (in this paragraph referred to as the ‘declarer’) entitled to the units in respect of which the declaration is made,
(b) is signed by the declarer,
(c) is made in such form as may be prescribed or authorised by the Revenue Commissioners,
(d) declares that, at the time the declaration is made, the person entitled to the units is an investment undertaking,
(e) contains the name, address and TIN of the investment undertaking,
(f) contains a certificate by the declarer stating whether or not the unit holder is a specified person after the application of section 739M,
(g) attaches, where the undertaking is one to which paragraph (f) of the definition of ‘specified person’ applies, supporting documentation evidencing equivalence,
(h) contains an undertaking by the declarer that if the investment undertaking ceases to be a specified person, the declarer will notify the IREF accordingly, and
(i) contains such other information as the Revenue Commissioners may reasonably require for the purposes of Chapter 1B of Part 27.
Declaration of company carrying on life business
5. The declaration referred to in section 739K, in respect of a life assurance company referred to in paragraph (c) or (f) of the definition of ‘specified person’, is a declaration in writing to the IREF which—
(a) is made by the person (in this paragraph referred to as the ‘declarer’) entitled to the units in respect of which the declaration is made,
(b) is signed by the declarer,
(c) is made in such form as may be prescribed or authorised by the Revenue Commissioners,
(d) declares that, at the time when the declaration is made, the person entitled to the units is a company carrying on life business within the meaning of Part 26,
(e) contains the name, address and TIN of the company,
(f) contains a certificate by the declarer stating whether or not the unit holder is a specified person after the application of section 739M,
(g) attaches, where the company is one to which paragraph (f) of the definition of ‘specified person’ applies, supporting documentation evidencing equivalence,
(h) contains an undertaking by the declarer that if the company ceases to be a specified person, the declarer will notify the IREF accordingly, and
(i) contains such other information as the Revenue Commissioners may reasonably require for the purposes of Chapter 1B of Part 27.
Declaration of Charity
6. The declaration referred to in section 739K, in respect of a charity referred to in paragraph (d) of the definition of ‘specified person’, is a declaration in writing to the IREF which—
(a) is made by the person (in this paragraph referred to as the ‘declarer’) entitled to the units in respect of which the undertaking is made,
(b) is signed by the declarer,
(c) is made in such form as may be prescribed or authorised by the Revenue Commissioners,
(d) declares that, at the time when the declaration is made, the person entitled to the units is a person who—
(i) is exempt from income tax under Schedule D by virtue of section 207(1)(b), or
(ii) is exempt from corporation tax by virtue of section 207(1)(b) as it applies for the purposes of corporation tax under section 76(6),
(e) contains the name, address and TIN of that person,
(f) contains a statement that at the time when the declaration is made the units in respect of which the declaration is made are held for charitable purposes only and—
(i) form part of the assets of a body of persons or trust treated by the Revenue Commissioners as a body or trust established for charitable purposes only, or
(ii) are, according to the rules or regulations established by statute, charter, decree, deed of trust or will, held for charitable purposes only and are so treated by the Revenue Commissioners,
(g) contains an undertaking by the declarer that if the person mentioned in subparagraph (d) ceases to be a person referred to in subparagraph (d), the declarer will notify the IREF accordingly, and
(h) contains such other information as the Revenue Commissioners may reasonably require for the purposes of Chapter 1B of Part 27.
Declarations of Credit Unions
7. The declaration referred to in section 739K, in respect of a credit union referred to in paragraph (e) of the definition of ‘specified person’, is a declaration in writing to the IREF which—
(a) is made by the person (in this paragraph referred to as the ‘declarer’) who is entitled to the units in respect of which the declaration is made,
(b) is signed by the declarer,
(c) is made in such form as may be prescribed or authorised by the Revenue Commissioners,
(d) contains the name, address and TIN of the declarer,
(e) declares that at the time when the declaration is made the person entitled to the units is a credit union, and
(f) contains such other information as the Revenue Commissioners may reasonably require for the purposes of Chapter 1B of Part 27.
Declarations of qualifying company
8. The declaration referred to in section 739K, in respect of a qualifying company referred to in paragraph (g) of the definition of ‘specified person’, is a declaration in writing to the IREF which—
(a) is made by the person (in this paragraph referred to as the ‘declarer’) who is entitled to the units in respect of which the declaration is made,
(b) is signed by the declarer,
(c) is made in such form as may be prescribed or authorised by the Revenue Commissioners,
(d) contains the name, address and TIN of the declarer,
(e) declares that at the time when the declaration is made the person entitled to the units is a qualifying company, and
(f) contains such other information as the Revenue Commissioners may reasonably require for the purposes of Chapter 1B of Part 27.”.”.
Section 22 provides for the introduction of a tax regime for IREFs, by inserting a new Chapter 1B into Part 27 and a new Schedule 2C into the Taxes Consolidation Act 1997. Amendments are being made simultaneously to section 21 of the Bill, which amends section 110 of the Taxes Consolidation Act 1997, to ensure there is no scope for arbitrage between the two areas. This has proved to be a difficult and complex issue, and the amendments required to address this issue in the Bill as published, in the first instance, and the new replacement Chapter which I am proposing, indicate the complexity of this topic. In order to provide coherent legislation to the committee, the original section 22 is being deleted and replaced with a new section. These amendments reflect further consideration of the provision in the light of feedback and commentary received by my Department and the Office of the Revenue Commissioners since publication. Further stringent anti-avoidance provisions have been included. These changes will act to ensure the provisions operate as intended and that the Irish tax base is protected.
The objective of these provisions is to provide for the introduction of a taxation regime for investment undertakings, where 25% of the value of that undertaking is made up of Irish real estate assets. These amendments do not in any way reduce the tax payable by funds and any exemptions provided for in the provision are merely a restatement of existing exemptions. The IREF must deduct a 20% withholding tax on certain property distributions. The amendment addresses the issue of non-resident investors who have been investing in Irish property through fund structures, thus avoiding a charge to tax on profits arising from Irish real estate. The 20% withholding tax will not apply to certain specific categories of investors who provide appropriate declarations, including pension funds, life assurance companies and other collective investment undertakings. This mirrors similar exemptions set out in the tax code for investment by these entities generally. In the new section, I am extending the list of exempt entities to include charities and credit unions.
I will outline the other additions to the section.
Section 739K(1) contains the definitions that apply to Irish real estate funds, IREFs. The primary definitions that have been updated in this section include "IREF assets" and "IREF business" and these are being extended to include "specified mortgages" under section 110 of the Taxes Consolidation Act 1997 and shares in real estate investment trusts, REITs. The broadening of the definitions ensures they encompass other types of property assets rather than just traditional land and property. They are also being recast to prevent a number of avoidance opportunities presented by the original drafting. The definition of "IREF excluded profits" is being inserted to draft the original provision more accurately, which excludes gains on assets held for longer than five years from the calculation of the IREF's profits. The definition of "IREF profits" is being updated to ensure the IREF profits are calculated in accordance with accounting rules, and the definition of "specified person" is being updated to extend the unit holders that would be exempt from the withholding tax to include charities and credit unions, as I have already mentioned.
Section 739K(2) sets out the mechanism for calculating the value of assets of an investment undertaking or sub-fund which is attributable to an IREF. Section 739L provides the formula for determining the IREF taxable amount. It is based on the retained earnings of the IREF and the portion of those referable to the IREF business. It excludes any amount of profit which was purchased by the unit holder on acquiring the units. Section 739M is an anti-avoidance provision which mirrors the personal portfolio investment undertaking, PPIU, legislation. The section ensures that IREF withholding tax cannot be avoided by placing a pension scheme, investment undertaking, company carrying on life business or fund above the IREF. Section 739N is an anti-avoidance provision to ensure an IREF cannot avoid IREF withholding tax by distributing the unrealised profits on real land in the State prior to their sale and subsequently disposing of an asset within the five-year window. In such circumstances, the disposal of that asset will be an IREF taxable event. The IREF will be liable to pay the IREF withholding tax within 30 days after the date of disposal on the applicable portion of the unrealised profits.
Section 739O provides for the taxation of IREF taxable events. This section will ensure that where the non-resident investor holds more than 10% of the IREF, the income they receive from the IREF will be treated as "income from immovable property". Ireland retains primary taxing rights to such income under our double tax agreements, meaning the rate of 20% cannot be reduced by a claim under such an agreement. This is in line with OECD guidance. Section 739P provides for the manner by which the IREF withholding tax is to be deducted. Section 739Q provides for the repayment of IREF withholding tax under double taxation agreements. Only the part of the IREF taxable amount which is to be treated as a dividend under section 739O may be applicable for relief under a double taxation agreement. The State retains taxing rights for income from immovable property. Section 739R sets out details regarding the time and manner in which the IREF withholding tax is to be accounted for and paid. Section 739S sets out the details which the IREF must give to its unit holders at the time of the taxable event.
Section 739T provides for a deduction of 20% of the total proceeds where the taxable event is one to which the IREF is not party, for example the sale of units rather than the redemption and issuance of units. Based on the capital gains tax withholding tax in section 980, this section applies where the amount or value of the consideration exceeds €500,000. The section sets out the mechanism of how the tax is to be collected and the procedure for claiming a repayment where applicable. Section 739U sets out requirements for the IREF to keep and retain the declarations which are made in accordance with Schedule 2C, the new Schedule which sets out the declarations required under Chapter 1B relating to an IREF.
One final provision, section 739V, relating to IREFs transferring their undertakings to normal trading companies, is also proposed. In effect, I am proposing that an investment undertaking may opt to convert from an investment undertaking into a company which is subject to the general corporate taxation regime. The conversion will constitute an IREF taxable event, which can be deferred. This option to convert from an IREF to a company will be time bound and must be carried out by 1 July 2017. This provision does not permit any form of tax avoidance and will be subject to stringent conditions as set out in the legislation. This provision is being included to maintain the consistency with the "step into shoes" principle that is provided for throughout the tax Acts. Any income tax, corporation tax or capital gains tax will be ultimately borne by the new company and the stamp duty will remain payable by the final non-connected purchaser as standard. The section applies to accounting periods commencing on or after 1 January 2017. If a decision is made by an investment undertaking on or after 20 October 2016 to change their accounting period, the section shall then apply to that accounting period commencing on or after 20 October 2016.
I am confident that the legislation, which introduces a dedicated regime for holding Irish property, strikes the appropriate balance between attracting long-term sustainable capital to the Irish property market while ensuring in so far as possible that the taxing rights from Irish real estate are retained in the Irish tax base. I commend these amendments to the committee. Due to the complexity of these issues, I would like to let the committee know that the Minister may bring forward further amendments on Report Stage.
