Dáil Éireann Debate, Wednesday - 14 September 2022
159. Deputy Pearse Doherty asked the Minister for Finance his analysis of the causes of the reduction in tax paid by Irish Real Estate Funds; and his views on whether amending the corporation tax applied to the profits made by IREFs could remedy these developments. [44358/22]
View answerSection 23 of the Finance Act 2016 introduced the Irish Real Estate Fund (IREF) tax regime to address concerns raised regarding the use of collective investment vehicles by non-residents to invest in Irish property. An IREF is an investment undertaking where 25% or more of the value of that undertaking is made up of Irish real estate assets. IREFs are required to deduct a 20% withholding tax (“IREF WHT”) on distributions to non-resident investors. The non-resident investors may also be subject to tax under the rules of their home jurisdiction. Certain categories of non-resident 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. Irish resident investors are generally subject to a separate investment undertaking tax, at a rate of 41% for individuals and 25% for companies, on income / gains from the fund.
I am aware that there has been a reduction in WHT paid by IREFs in 2021 (in respect of taxable events that occurred in accounting periods ended in 2020), relative to the amount paid in the preceding year, and my officials have requested that Revenue undertake a review to identify the reason(s) for this change.
I am advised that the initial focus of the review is a detailed analysis of the information contained in the 2021 IREF Financial Statements, IREF Withholding Tax Returns and Form 1 (IREFs) Income Tax Returns. The review encompasses the consideration of various risk factors and a key focus is the identification of cases for compliance interventions to ensure perceived risks are properly and robustly addressed. The analysis involves detailed examination of tax returns and financial statements for a number of years and will include a review of the transactions undertaken by IREFs, and of distributions made, to ascertain if the distributions have been treated in accordance with the legislative provisions. Where this work identifies possible non-compliance with the relevant legislation, Revenue will undertake appropriate compliance interventions. Should any deficiencies in the legislative provisions for IREFs be identified by this review, this will be brought to the attention of my Department.
As respects the Deputy’s suggestion of applying corporation tax to the profits made by IREFs, any such proposal can only be examined once the full facts and circumstances of any issues with the existing regime have been identified and analysed.
