Dáil Éireann Debate, Tuesday - 24 October 2017
23. Deputy Pearse Doherty asked the Minister for Finance if he will remove the dividend withholding tax exemption that international investors can benefit from if they hold property for five years or more. [44714/17]
View answerIrish Real Estate Funds(IREF's) are investment undertakings (excluding UCITS) where 25% of the value of that undertaking is made up of Irish real estate assets.
The legislation was introduced in Finance Act 2016 to address concerns raised regarding the use of collective investment vehicles to invest in Irish property. Investors had been using the structures to minimise their exposure to Irish tax on Irish property transactions.
IREFs must deduct a 20% withholding tax on certain property distributions to non-resident investors. The withholding tax will not apply to certain categories of investors such as pension funds, life assurance companies and other collective investment undertakings.
Capital gains will also be included in the calculation of profits unless the asset is held for five years or more. Where the asset is held for five years or more but the investor has the ability to control or influence the selection of property in the fund, they will not qualify for the capital gains tax exemption. Although a gain may be exempt where the property is held for more than five years, tax will still be payable on the rental income that is being generated.
By way of comparison, there is a full exemption for non-residents from UK capital gains tax on all commercial property gains in the UK no matter what type of structure is used for investment purposes (i.e. a fund, a normal company, partnership etc).
The Finance Bill is being considered at Second Stage later this week, and this will provide an opportunity for the House to consider this issue.
