A Real Estate Investment Trust or REIT is a quoted company, used as a collective investment vehicle to hold rental property. A REIT is exempt from corporation tax on qualifying income and gains from rental property, subject to a high profit distribution requirement to. A REIT provides the same after-tax returns to investors as direct investment in rental property, by eliminating the double layer of taxation at corporate and shareholder level which would otherwise apply.
In the 2016 Finance Act I introduced the Irish Real Estate Fund or IREF. The legislation was introduced to address concerns raised regarding the use of collective investment vehicles by non-resident investors to invest in Irish property. IREFs must deduct a 20% withholding tax on certain property distributions to non-resident investors.
I believe that the taxation regimes remain appropriate for these entities. The REIT regime is designed to prevent a double layer of taxation and the IREF regime is designed to protect the State's taxing rights over property, neither of these are favourable tax regimes. I would also like to state that there is no evidential link between these tax regimes and house price increases.
My Department continues to monitor developments in the housing market, including residential property prices, on an ongoing basis. The current inflationary pressure in the residential market reflects an insufficient supply response to meet the current demographic demand for housing. To address this imbalance the outstanding bottlenecks in the housing market need to be tackled.
