Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

No, I think the position is clear. It applies to distribution. As long as income such as rental income and so on remains within the fund, there is no tax. It is the distribution or the sale that triggers the actual event.

When the Minister of State was discussing the 25% threshold with Deputy Pearse Doherty earlier, he made the point that it is principally designed to capture the 96 Irish funds that hold approximately €10 billion worth of real estate between them. These funds are now always going to be captured because of that 25% requirement. However, foreign-owned funds can bring a wider breadth of assets into a new structure. They cannot be retrofitted into an existing structure due to the anti-avoidance provision, but new structures that are set up with a lot of foreign assets can come in under the 25% threshold. Does that then put the Irish-owned funds at a disadvantage compared to the foreign-owned funds that can structure their affairs accordingly to remain outside the IREF requirements? Would they be operating, therefore, to a different business model as such? I ask the Minister of State to comment on that.

The Minister of State has acknowledged that the chargeable gain exemption that would apply in respect of assets held for a five-year period is a policy decision. From what I gather from his remarks, the motivation behind it is to encourage funds to hold property for a reasonable period and not to flip the assets in a short period. The argument could be put that five years is a very short period. The Government could require that the assets are held for a longer period. If it believes that the exemption is desirable on the basis of assets being held for a defined period, then why did the Government arrive at a five-year requirement? I ask the Minister of State to comment on that.

One point that the Irish Funds Industry Association, which represents regulated funds, makes about Irish pension schemes and Irish life assurance companies is that if they invest directly in Irish property, they will remain exempt. It makes the point that many of them invest through an Irish-regulated fund and could now be captured by the IREF requirements. I ask the Minister of State to deal with the statement that the Irish Funds Industry Association has made. I imagine that is not the intended effect of the legislation because the Government is providing explicit exemptions to life assurance companies and, indeed, to pension funds as well.