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Tax Code

Dáil Éireann Debate, Tuesday - 15 May 2018

Tuesday, 15 May 2018

Ceisteanna (155, 157)

Pearse Doherty


155. Deputy Pearse Doherty asked the Minister for Finance the expected revenue from ending the capital gains tax exemption from the sale of property held in real estate investment trusts, REITs. [21181/18]

Amharc ar fhreagra

Pearse Doherty


157. Deputy Pearse Doherty asked the Minister for Finance the expected revenue from introducing a minimum dividend withholding tax rate of 25% on all dividends paid by REITs. [21183/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I propose to take Questions Nos. 155 and 157 together.

Finance Act 2013 introduced the regime for the operation of Real Estate Investment Trusts (REITs) in Ireland. 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.

Property rental income and gains arising are exempt from tax within the REIT and are taxed at the investor level when distributed. The legislation requires that 85% of all property income profits be distributed annually to shareholders. The REIT is subject to corporation tax on income and gains not arising from the property rental business of the REIT.

I am advised by Revenue that information in respect of potential future capital gains from the sale of property of REITs is unavailable, I am therefore unable to provide an accurate estimate of the potential revenue to be obtained from the ending of the exemption. It is also worth noting that REITs are specifically designed to focus on the long-term holding of income producing property and contain provisions to encourage the re-investment of property sale proceeds in new property rental assets. REITs are not designed to hold development activities, or as a vehicle for short term speculative gains.

With regard to withholding tax on REIT dividends, Deputies will be aware that, in the absence of any other provisions, foreign REIT shareholders in treaty partner countries would not have had any liability to Irish tax on REIT dividends. In order to ensure that tax from foreign investors is retained, a Dividend Withholding Tax (DWT) at the standard rate of tax (20%) was legislated for to specifically apply to REIT dividends. Foreign investors from treaty resident countries may be able to reclaim some part of this DWT if the relevant tax treaty allows for this. The taxation of dividends varies from treaty to treaty, but commonly a source state would retain the right to approximately 15% tax on dividends paid from that state.

Due to this interaction with tax treaty reliefs, and also taking into account the fact that information in respect of potential future annual distributions from REITs to investors is not available, an accurate estimate of the potential revenue from an increase in the withholding tax rate applicable to any such distributions cannot be made.