Bríd Smith
Ceist:76. Deputy Bríd Smith asked the Minister for Finance if he will consider revising the tax exemptions granted to REITs in the Finance Bill 2013; and if he will make a statement on the matter. [1654/17]
Amharc ar fhreagraTuesday, 17 January 2017
Ceisteanna (76)
Freagraí scríofa
Section 41 of the first Finance Act of 2013 introduced the regime for the operation of Real Estate Investment Trusts (REIT) in Ireland. A REIT is a quoted company, used as a collective investment vehicle to hold rental property. They generally have a diverse ownership requirement, so no one person or group of connected persons can control the REIT. REITs are a common structure used across a number of other countries. Approximately 35 other jurisdictions worldwide have REIT or REIT-equivalent structures including the UK, Germany, France, USA amongst others.
The function of the REIT framework is not to provide an overall tax exemption, but rather 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.
A REIT is exempt from corporation tax on qualifying income and gains from rental property, subject to a high profit distribution requirement to shareholders. They provide the same after-tax returns to investors as direct investment in rental property, by eliminating the double layer of taxation at corporate and shareholder level which would otherwise apply.
As such, the estimated cost attached to the REIT relates not to an exemption from tax, but rather to the move from direct taxation of rental income to the taxation of dividends distributed from REIT profits arising from that rental income. The extent of any net tax cost of the REIT exemptions will therefore be the difference between the tax which would have arisen on the property income in non-REIT ownership, and the tax charged on the dividends paid out of that property income by the REIT to their investors. The Irish REIT legislation requires that 85% of all property income profits be distributed annually to shareholders.