Dáil Éireann Debate, Tuesday - 18 May 2021
311. Deputy Pearse Doherty asked the Minister for Finance the total operating profit, profit before taxation and profit after taxation deriving from rental and related income for Irish real estate funds in each of the years 2017 to 2019. [26462/21]
View answer312. Deputy Pearse Doherty asked the Minister for Finance the amount of IREF dividend withholding tax deducted for 2017, 2018 and 2019 as a proportion of total profit before and after taxation deriving from rental and related income for Irish real estate funds in each of the years 2017 to 2019. [26463/21]
View answerI propose to take Questions Nos. 311 and 312 together.
Finance Act 2016 introduced the IREF regime to address the use of certain fund vehicles to invest in Irish property by non-resident investors, thereby avoiding a charge to tax on profits arising from Irish real estate. The regime provides that the profits arising to an Irish fund from Irish property remain within the charge to Irish tax.
An Irish Real Estate Fund (IREF) is an investment undertaking, or a sub-fund, which derives 25% or more of its market value from assets deriving their value directly or indirectly from real estate in the State. IREFs are subject to a 20% IREF withholding tax on distributions to non-resident investors. Irish resident individuals/corporates are separately subject to investment undertakings tax. Certain categories of investors such as pension funds, life assurance companies and other collective investment undertakings are generally exempt from having IREF withholding tax applied provided the appropriate declarations are in place.
Details of the total profits arising to IREFs for the periods 2017, 2018 and 2019 are set out in Table 1.
Table 1 Details of total profits arising to IREFs
|
|
2017 € |
2018 € |
2019 € |
|
Operating Profit |
911,833,875 |
867,739,813 |
1,159,450,861 |
|
Profit Before Tax as per Financial Statements |
690,641,103 |
498,299,253 |
724,795,840 |
Taxation is levied in respect of IREFs at the point of distribution of profits to investors. I am advised by Revenue that IREFs are required to make returns and payments of IREF withholding tax in respect of taxable events occurring during a specified period i.e. when a unit holder receives value for the accrued profits of the IREF. There are a number of situations where a taxable event arises but in most cases this will be on the making of a cash or a non-cash distribution to a unit holder or on the cancellation, redemption or repurchase of units from a unit holder. IREFs are not obliged to separately report the source of the profits attributable to the IREF taxable event on the IREF return. Given the profits of an IREF are generated from various property related activities, including for example property development, property sales, rental income and service charges, Revenue does not have a breakdown of the profits deriving specifically from rental and related income for the periods in question.
Details of the IREF withholding tax, calculated on the amount of a taxable event (for example a distribution to a unit holder) paid for each period is set out in Table 2. Additionally, investment undertaking tax (IUT) rather that IREF withholding tax may be applicable if the investor is Irish Resident.
Table 2 – Details of IREF withholding tax and income tax paid by IREFs
|
|
2017 € |
2018 € |
2019 € |
|
IREF Taxable Amount |
44,666,427 |
212,776,714 |
368,463,650 |
|
IREF Withholding Tax paid |
8,321,359 |
28,229,097 |
65,759,048 |
|
Income tax charge paid* |
n/a |
n/a |
6,211,720 |
* The Finance Act 2019 contained a number of anti-avoidance measures for IREFs. IREFs are regarded as having income subject to income tax where they have excessive debt or expenses that are not wholly or exclusively for the purpose of their business. Any excessive amounts are regarded as deemed income of the IREF and chargeable to income tax at 20%. No losses, deficits, expenses or allowances may be set off against such income for the purpose of determining the chargeable amount. For the three month period to 31 December 2019, income tax was paid as shown in Table 2.
