Wednesday, 8 May 2019

Questions (146, 149, 150)

Pearse Doherty

Question:

146. Deputy Pearse Doherty asked the Minister for Finance the value of property held by REITs in each of the years 2016 to 2018 and to date in 2019. [19316/19]

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Pearse Doherty

Question:

149. Deputy Pearse Doherty asked the Minister for Finance the effective corporate tax and capital gains tax rates for REITs in each of the years 2016 to 2018. [19322/19]

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Pearse Doherty

Question:

150. Deputy Pearse Doherty asked the Minister for Finance the definition of completed REITs which are subject to capital gains tax on developed assets sold within three years of completing development; if it refers to building structures such as roof in place; and if not, if it refers to completed when furnished. [19323/19]

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Written answers (Question to Finance)

I propose to take Questions Nos. 146, 149 and 150 together.

Finance Act 2013 introduced the regime for the operation of Real Estate Investment Trusts (REITs) in Ireland. The function of the REIT framework is not to provide an overall tax exemption, but rather to facilitate collective investment in rental property by removing a double layer of taxation which would otherwise apply to property investment via a corporate vehicle.  

A company electing to be a REIT must meet specific conditions in accordance with Part 25A of the TCA. Once such conditions are met a REIT is not chargeable to corporation tax on income derived from its property rental business or chargeable to capital gains tax accruing on the disposal of assets of its property rental business under section 705G (1) TCA 1997. The definition of effective tax rates is not defined or settled but given that REITs in general are not liable to corporation or capital gains taxes the issue of an effective rate doesn’t generally apply.

While qualifying property rental income and gains arising are exempt from tax within the REIT, a REIT is subject to CGT if:

- it acquires an asset that is used for the purposes of its property rental business and

- following that acquisition the asset is developed to the extent that the development cost exceeds 30 per cent of the market value of the asset at the time the development commenced and

- the asset is then disposed of within 3 years of completion of the development

Completion in this context applies to the completion of the development work, and not the completion of a building, for example.  The concept of developing land, which is not defined, has been in the Tax Acts for over 50 years. It is given its normal meaning rather than any specific tax meaning. In order to determine when the development work in question commenced and concluded, each scenario would be considered on the specific facts and circumstances applying.

In relation to the value of property held by REITs, I am informed by Revenue that given the small number of REITs they are unable to provide details of specific taxpayer information for reasons of taxpayer confidentiality. This includes information concerning the value of property held by REITs. However, each REIT publishes detailed annual reports and financial accounts which are publicly available and may provide the Deputy with the desired information.

Question No. 147 answered with Question No. 115.
Question No. 148 answered with Question No. 145.