Dáil Éireann Debate, Tuesday - 15 June 2021
70. Deputy Catherine Connolly asked the Minister for Finance his plans to review the current tax exemptions for real estate investment trusts and Irish real estate funds; and if he will make a statement on the matter. [31783/21]
View answerInvestment funds are a long term presence in the Irish market, as in most other property markets. As with investment funds generally, tax occurs primarily at the level of the investor rather than within the fund. Additionally, in the case of both Irish Real Estate Funds (IREFs) and Real Estate Investment Trust companies (REITs), withholding taxes apply on distributions to investors to ensure collection of tax revenues.
The operation of such investment structures is kept under review and in recent Finance Acts, I have made significant changes where concerns have been identified, to ensure that appropriate tax is collected.
In 2019, officials in my Department produced a report on REITs and IREFs as respects their investment in the Irish property market. The report provided a basis for policy discussions and the amendments which were introduced in Finance Act 2019.
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.
In relation to REITs, Finance Act 2019 extended the obligation to deduct DWT 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.
Institutional investment in commercial and residential property is critically important to generating additional supply of property in Ireland through forward-funding of development projects, particularly in the area of high-density urban developments such as apartment buildings. Rebuilding Ireland identified the encouragement of the build-to-rent sector as a key factor in improving the rental sector and acknowledged that institutional investors have the potential to provide significant investment in such projects.
However, I do not support the bulk purchase of residential houses by institutional investors. This is why, in light of recent concerns raised, I have introduced a new 10% rate of Stamp Duty on such purchases, increased from the rates paid by other purchasers of 1% on values up to €1 million and 2% on values above €1 million.
