Thursday, 26 September 2019

Questions (14)

Pearse Doherty


14. Deputy Pearse Doherty asked the Minister for Finance if he is satisfied that REITs and IREFs are paying a fair share of tax; and if he will make a statement on the matter. [39082/19]

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Written answers (Question to Finance)

Institutional investors represent one aspect of the property market and have an important role in increasing supply.

Notwithstanding this, the Government monitors the actions of investors in the market and has taken action when abuses have been identified. In 2016, changes were introduced to address concerns regarding the use of collective investment vehicles by foreign investors to take profits derived from Irish real estate without paying Irish tax.

This resulted in the introduction of the IREF (Irish Real Estate Fund) framework in 2016.  IREFs are investment undertakings, excluding UCITS, where at least 25% of the value of that undertaking is made up of Irish real estate assets. Where an IREF makes an actual distribution or on the redemption of units in the IREF, non-resident investors will be subject to a withholding tax of 20%. Certain investors such as pension funds, life assurance companies, charities and credit unions are exempt from the withholding tax as this is the norm for such bodies across the tax acts.

The Real Estate Investment Trust (REIT) framework was introduced in 2013, to facilitate long-term, risk-diversified, collective investment in rental property. In order to be a REIT, a company must be listed on the main market of an EU stock exchange within three years of forming, and it must be widely held. Income and gains from Irish property are not taxed within the REIT but are instead taxed in the hands of the investor when distributed.

Dividend withholding tax at 20% must be applied to all distributions from REITs, other than distributions to certain limited classes of investors such as pension funds and charities as they are more generally exempt from tax.

Given the important implications which developments in the property market can have for the economy, my Department actively monitors developments in this sector on an ongoing basis. As part of the 2018 Finance Act process I committed to produce a report on REITs, IREFs and section 110 companies as they invest in the Irish property market. This report was prepared by officials in my Department and was presented to the Tax Strategy Group in July. This paper provides a basis for policy discussions in relation to institutional investment in the Irish property market.