Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

I move amendment No. 56:

In page 48, lines 38 and 39, to delete “the IREF is a personal portfolio IREF in respect of any of the unit holders” and substitute “subject to section 739N, the IREF is a personal portfolio IREF in respect of the unit holder".

I propose to take amendments Nos. 56 and 57 together. Amendment No. 56 does two things. First, it deletes section 739N as published. As the ability of closely held funds to distribute capital gains without withholding tax has been removed by amendment No. 47, it is no longer necessary to have the associated anti-avoidance provision.

The second amendment is the anti-avoidance measure which involved the concept of a personal portfolio IREF. It has been identified that the definition, as currently drafted, would include structures that it was not intended to include. Three such structures were identified.

First, where a pension scheme invests in Irish property through an IREF, which it controls, the IREF withholding tax would have applied on distributions from the IREF to the pension fund. While this is appropriate if that pension fund itself is closely held, it is not appropriate if the pension fund itself is not under the control of any of its unit holders. Therefore, I am providing that the IREF withholding tax will not apply in these circumstances.

Second, widely held funds may have changed their legal form. The way in which a change in legal form is technically done is through the contribution of the assets of the old fund into the new fund. As the anti-avoidance provision is currently drafted, the contribution of those assets in specieinto the new fund causes the new fund to be caught. Therefore, I am providing that if an in speciecontribution is the only reason that the anti-avoidance rules are triggered in an otherwise widely held fund, the IREF withholding tax will not apply.

The third and final amendment is required to deal with larger corporate groups where sister companies may be pension fund managers, investment fund managers and life assurance companies. As drafted, if a widely held pension fund invested in a widely held investment undertaking where the investment manager was part of the same corporate group, then the anti-avoidance rules would have been triggered. That is because the unit holder - the pension fund - and the investment manager are technically connected even though in law the investment manager cannot show any preference to the pension fund over the other unit holders. Therefore, I am providing that where there is a technical connection, but where that connection cannot be used to the benefit of the unit holder, the anti-avoidance rules will not apply.

I commend these amendments to the House.

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