Dáil Éireann Debate, Thursday - 20 May 2021
203. Deputy Bríd Smith asked the Minister for Finance the number of applications for refunds of dividend withholding tax connected to the operation of real estate investment trusts and any other corporate bodies to which this is applicable since 2013; the amounts involved by year in tabular form; and if he will make a statement on the matter. [27301/21]
View answerReal Estate Investment Trusts (REITs)
Finance Act 2013 introduced the regime for the operation of Real Estate Investment Trust companies (REITs) in Ireland and the applicable rules are set out in Part 25A, Taxes Consolidation Act 1997.
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 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.
- Certain investors, such as pension schemes or charities, may receive distributions gross, subject to completion of appropriate declarations.
- Foreign investors are subject to 25% DWT on distributions received from a REIT. However, non-resident investors who suffer DWT and who are resident in countries with which Ireland has a double tax agreement (DTA) may be able to reclaim some of the DWT if the relevant DTA permits.
The table below sets out the number and value of DWT refunds connected to the operation of REITs from 2015 to 2021 (year to date).
|
No. of refund applications |
Value € |
|
|
2015 |
26 |
€57,476 |
|
2016 |
93 |
€714,787 |
|
2017 |
311 |
€823,793 |
|
2018 |
387 |
€843,893 |
|
2019 |
527 |
€883,741 |
|
2020 |
911 |
€1,926,841 |
|
2021 |
447 |
€1,037,359 |
The rules relating to Irish Real Estate Funds (IREF) are set out in Chapter 1B of Part 27, Taxes Consolidation Act 1997, and were introduced by Finance Act 2016. An IREF is an investment fund, or a sub-fund, which derives 25% or more of its market value from assets acquiring their value directly or indirectly from real estate in the State.
As an investment undertaking, the profits of the IREF are not taxed within the fund, but instead are subject to tax in the hands of the investors. IREFs are subject to a 20% withholding tax on distributions to non-resident investors. Irish resident individuals/corporates are 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.
IREFs are required to declare and pay this withholding tax on an annual basis and the first returns of (IREF) taxable events were due in July 2018, in respect of 2017 (for IREFs with a 31 December year-end).
Investors can make a claim for a partial refund of IREF withholding tax if they are entitled to a lower rate of withholding tax under a DTA. The charge to Irish tax will be reduced to the DTA rate. The first applications for refunds of IREF withholding tax were made in 2019 and the table below sets out the number and value of such refunds from 2019 to 2021 (year to date).
|
No. of refund applications |
Value € |
|
|
2019 |
<10 |
€192,239 |
|
2020 |
39 |
€3,249,508 |
|
2021 |
<10 |
€2,521,413 |
