Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The primary purpose of dividend withholding tax, DWT, is to collect tax at source when Irish resident companies make taxable distributions to Irish residents. Some non-resident persons are exempt from DWT, including non-resident individuals who are resident in a country with which Ireland has a tax treaty and companies which are not resident in Ireland and which are resident in a country with which Ireland has a tax treaty, subject to certain other conditions.

The exemptions are not automatic and must be established by means of an appropriate declaration of entitlement to exemption completed by the applicant. It should be noted that if the exemptions from DWT were not available, any DWT deducted would have to be refunded. Deducting DWT in cases where there is no liability to Irish tax on the dividend income would result in an additional administrative burden for the recipient of the dividend and for Revenue and, ultimately, no net additional yield to the Exchequer.

The legislation in the Finance Bill provides for a new tax regime for Irish real estate funds, IREFs. Irish real estate funds are certain investment undertakings where 25% of the value of that undertaking is made up of Irish real estate assets. IREFs must deduct a 20% withholding tax on certain property distributions. This IREF withholding tax is not a dividend withholding tax and the tax exemptions which non-resident investors can rely on in relation to dividend withholding tax do not apply to IREF withholding tax. Details are contained in section 22 of the Finance Bill as published and will be subject to Committee Stage amendments this week, on Tuesday and Wednesday. My proposed Committee Stage amendment clarifies that, in respect of unit holders who hold more than 10% of the units in an IREF, income received from an IREF will be income from immovable property and, under Ireland's double-taxation agreements, Ireland retains primary taxing rights over that income.

The IREF withholding tax does not fall within the DWT regime which is set out in Part 6 of the Taxes Consolidation Act. The details on the new IREF tax regime will form part of a new stand-alone Chapter in Part 27 of the Taxes Consolidation Act. There is no overlap or interaction between the two regimes.

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