Dáil Éireann Debate, Tuesday - 11 May 2021
232. Deputy Pearse Doherty asked the Minister for Finance the estimated revenue that would be generated by introducing a 3% stamp duty surcharge on the purchase of residential properties by trusts, partnerships and companies including real estate investment trusts (REITs) and Irish Real Estate Funds (IREFs) and if he will make a statement on the matter. [24233/21]
View answer246. Deputy Alan Kelly asked the Minister for Finance if he will provide a list all of the tax exemptions and reliefs which have been available to real estate investment trusts in each of the years 2013 to 2020, in tabular form; and the total loss to the Exchequer as a result of the trusts availing of each of these tax exemptions and reliefs in each of the years. [24497/21]
View answer247. Deputy Alan Kelly asked the Minister for Finance the number of registered real estate investment trusts in operation in the State. [24498/21]
View answer248. Deputy Alan Kelly asked the Minister for Finance the estimated amount that has been paid in stamp duty by real estate investment trusts in tabular form; and the number of units that stamp duty was paid on by real estate investment trusts for the purchase of properties in the State for each of the years 2013 to 2020. [24499/21]
View answerI propose to take Questions Nos. 232, 246, 247 and 248 together.
Finance Act 2013 introduced the regime for the operation of Real Estate Investment Trust companies (REITs) in Ireland. The purpose of the REIT regime is to allow for a collective investment vehicle which provides a comparable after-tax return to investors to direct investment in rental property, by eliminating the double layer of taxation at corporate and shareholder level which would otherwise apply. This double layer of taxation is removed by providing that REITs are not subject to corporation tax on their rental profits or on any gains that arise from the disposal of rental properties, and requiring that REITs must distribute at least 85% of profits annually for taxation at the level of the investor.
There are a number of criteria which companies must meet in order to avail of the REIT tax regime, including the requirement to be listed on a the main market of an EU stock exchange, a debt cap and an income-to-financing costs ratio.
Dividend Withholding Tax (DWT) provisions at a rate of 25% apply to distributions by REITS. The tax position of REIT investors is as follows:
- Irish resident REIT investors are required to pay tax at their marginal rate on any distributions they receive on a self-assessment basis, with a credit available for any DWT deducted;
- Foreign investors are subject to 25% DWT on distributions received from a REIT. However, investors in tax treaty countries may be able to reclaim some part of the DWT if the relevant tax treaty allows for this. The taxation of distributions varies from treaty to treaty, but commonly a source state would retain the right to approximately 15% tax on dividends paid from that state.
- Excluded investors, such as pension schemes or charities, may receive distributions gross, subject to completion of appropriate declarations. Such entities are more generally exempt from tax or subject to gross roll-up regimes where tax is accounted for on distribution, such as the taxation of pensioners on pensions received.
The REIT regime is continually under review to ensure that REITs continue to meet the purpose for which the regime was designed. Amendments were made to the taxation of REITs in Finance Act 2019 to ensure they operate in line with the original policy intention of encouraging long-term, stable investment in rental property. The obligation to deduct DWT was extended to include distributions of the proceeds of capital disposals, and a provision providing a relief from Capital Gains Tax on ceasing to be a REIT was limited to apply only after a minimum term of 15 years of REIT status.
In relation to question 24233/21, Revenue has reviewed Stamp Duty records for 2020 to identify possible property purchases by entities such as trusts, partnerships and companies including REITs and Irish Real Estate Investment Funds (IREFs), as well as other purchases of multiple properties. For those that can be readily identified, there are approximately 1,330 properties purchased in 2020 with Stamp Duty paid of €9.1 million. Residential property accounted for over 99% of the 1,330 transactions. This is out of about 56,000 stamp returns are marked as residential in 2020, meaning the identified purchases represent less than 3% of total residential transactions in 2020.
On the basis of this activity, I am advised by Revenue that applying a 3% surcharge to all such property acquisitions in 2020 could have yielded in the region of €4.5 million. The possible yield in future years would depend on the level of activity in a given year, which cannot be predicted at this stage.
Regarding questions 24497/21, 24498/21 and 24499/21, Revenue has confirmed that due to the small number (less than 10) of REITs that operate in Ireland, and Revenue’s obligation to maintain the confidentiality of taxpayer information, specific quantitative information in relation to these entities cannot be provided.
