Dáil Éireann Debate, Tuesday - 11 April 2017
159. Deputy Pearse Doherty asked the Minister for Finance the consideration that has been given to the introduction of a levy on funds based on the Luxembourg model; and if he will make a statement on the matter. [18269/17]
Amharc ar fhreagraThe normal tax treatment afforded to Irish collective investment funds is that the funds invested are allowed to grow on a tax-free basis within the fund. The income is taxed at the level of the investor rather than the fund, as is standard international practice. The 'Gross Roll Up' regime is the term applied to the mechanism whereby investment funds are not subjected to taxation on their income and gains within the fund. That allows the income of the fund to 'roll up' on a gross basis within the fund. The fund may thus grow without deductions for taxation. The fund may, however, suffer withholding taxes on its income or gains and is investors will pay tax as appropriate in the investor's country of residence or establishment. I believe that this is a more appropriate model for taxing funds rather than through a levy.
The broad rationale for exempting such funds from direct taxation at fund level is to facilitate individuals to invest collectively, without suffering double taxation, that is, taxation both within the fund and in the hands of the investor on distribution. Most OECD countries now have a tax system that provides for neutrality between direct investments and investments through a Collective Investment Vehicle or Fund.
Ireland is one of the leading jurisdictions in the world for the establishment and servicing of internationally distributed investment funds. The international funds industry employs over 13,000 people in Ireland. It is a major element of the International Financial Services (IFS) industry which employs over 38,000 people in the State.
In the Finance Act 2016 I introduced the Irish Real Estate Fund (IREF) regime to address the issue of non resident investors, who had been investing in Irish property through fund structures. An IREF is an investment undertaking in which 25% or more of the value of the assets is derived from IREF assets or where it is reasonable to consider the main purpose or one of the main purposes of the investment undertaking is to acquire IREF assets or to carry on IREF business. The IREF must deduct a 20% withholding tax on certain property distributions.
