Dáil Éireann Debate, Tuesday - 15 June 2021
118. Deputy Mick Barry asked the Minister for Finance if he will report on the impact assessment on the changes to taxation charged to so-called cuckoo funds in particular the impact on affordability of housing; and if he will make a statement on the matter. [31778/21]
View answerAs the Deputy will be aware, on May 19th this year I introduced by way of a Financial Resolution a new measure which applies a stamp duty charge on bulk purchases of houses, which took effect from midnight that day. This new stamp duty rate replaces the pre-existing stamp duty rates for residential property, which are 1% for the first €1 million in consideration and 2% on amounts above €1 million (on a per-property basis).
In brief the new measure has the following effect.
The charge applies to bulk purchasers, being a purchaser who acquires 10 or more residential dwellings (other than apartments) within a 12 month period.
When the threshold of 10 is passed, the higher 10% rate applies in respect of all purchases within the 12-month period. For example, a purchase of 4 houses in August 2021 would be liable at normal residential rates. If the same purchaser acquires a further 6 units in November 2021, the 10% rate applies on all 10 houses, with credit allowed for stamp duty already paid on the earlier purchases.
The measure applies in respect of bulk purchases of residential dwellings, other than of apartments in apartment blocks. Apartments are defined as a multi-storey building of 5 or more units, having common or shared access.
Alongside the recent stamp duty measure, my Department has also introduced a number of measures in recent years designed to regularise the tax affairs of property focussed investment funds and to ensure they are taxed at an appropriate level .
Finance Act 2013 introduced the regime for the operation of Real Estate Investment Trusts (REITs) in Ireland, based on an established international standard. 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.
Finance Act 2016 introduced the Irish Real Estate Fund (IREF) regime to address the use of certain fund vehicles facilitating the investment 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. Generally IREFs must deduct a 20% withholding tax on distributions to non-resident investors.
Finance Act 2019 made amendments to the taxation of REITs and IREFs to ensure the regimes operate as intended. In relation to REITs, Finance Act 2019 extended the obligation to deduct Dividend Withholding Tax to include distributions of the proceeds of capital disposals. In addition, the deemed disposal provisions upon cessation of REIT status were restricted to REITs that have been in operation for at least 15 years, in line with the regime's stated objective of encouraging long-term, stable investment in rental property. In relation to IREFs, amendments were made in Finance Act 2019 to prevent the use of excessive debt and other payments to reduce distributable profits, and to prevent the avoidance of tax on gains on the redemption of IREF units. These amendments were made to ensure appropriate levels of tax are paid by investors in Irish property.
Given the timescales involved in property investment, it is not yet possible to assess the impact of the various more recent measures, including (where appropriate) their impact on the affordability of housing. I can however assure the Deputy that my Department keeps tax issues under ongoing review and I will consider any further measures in respect of the taxation of property funds if and when I think it necessary.
