Dáil Éireann Debate, Thursday - 22 September 2022
115. Deputy Pearse Doherty asked the Minister for Finance if he will review and reform the advantageous tax regime enjoyed by IREFs and REITs following the sharp decline in taxes paid by institutional property investment funds and recommendations made by the Commission on Tax and Welfare. [46287/22]
View answerAn Irish Real Estate Fund (IREF) is an investment undertaking where 25% or more of the value of that undertaking is made up of Irish real estate assets. The regime was introduced to address concerns raised regarding the use of collective investment vehicles by non-residents to invest in Irish property. A Real Estate Investment Trust (REIT) is a quoted company, used as a collective investment vehicle to hold rental property. The function of the REIT framework is to facilitate collective investment in rental property by removing a double layer of taxation which would otherwise apply on property investment via a corporate vehicle.
I am aware that there has been a reduction in Withholding Tax (WHT) paid by IREFs in 2021, relative to the amount paid in the preceding year. My officials have requested that Revenue undertake a review to identify the reason 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, 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 and addressed.
I have noted the recommendation by the Commission on Taxation and Welfare that the Government undertake a review of REITs and IREFs, having regard to the role of institutional investment in the Irish property market.
The Commission’s recommendations are significant and wide ranging, and it is important to allow time for detailed consideration. It is my intention to provide an initial response to some of the recommendations as part of the upcoming budget. It would not be appropriate for me to speculate on what specific elements of the report we might act on in advance of that process concluding over the coming weeks.
