Real Estate Investment Trusts

Tuesday, 21 May 2019

Questions (185, 187)

Pearse Doherty

Question:

185. Deputy Pearse Doherty asked the Minister for Finance the expected revenue from ending the capital gains tax exemption from the sale of property held within REITs. [21939/19]

View answer

187. Deputy Pearse Doherty asked the Minister for Finance the estimated revenue from introducing a minimum dividend withholding tax rate of 25% and of 30% on all dividends paid by REITs. [21941/19]

View answer

Written answers

Minister for Finance

I propose to take Questions Nos. 185 and 187 together.

The regime for the operation of Real Estate Investment Trusts (REITs) in Ireland was introduced in Finance Act 2013. The framework for REITs is designed to facilitate collective investment in rental property by removing a double layer of taxation which would otherwise apply on property investment through a corporate vehicle. The property rental income and gains are exempt from tax within the REIT, they are taxed instead at the investor level when distributed. Part 25A of the Taxes Consolidation Act 1997 (“TCA 1997”) requires that 85% of all property income profits are distributed annually to investors. Any income or gains arising to the REIT which is not in respect of the REITs property rental business is subject to corporation tax.

I am advised by Revenue that information in respect of potential future capital gains from the sale of property held by REITs is unavailable. I am therefore unable to provide an accurate estimate of the potential revenue which would be raised from the removal of the exemption.

In relation to dividend withholding tax, in order to ensure tax was retained from non-resident investors a dividend withholding tax at the standard rate of tax (20%) was legislated for to apply to REIT dividends. Non-resident REIT shareholders resident in treaty countries may be able to reclaim part of this dividend withholding tax if the relevant treaty allows. Given this interaction with tax treaties and that information is not available in relation to potential future REIT dividends to investors an accurate estimate of any potential revenue from an increase in the withholding tax rate cannot be made.