Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I propose to take Questions Nos. 23 and 53 together.

A real estate investment trust or REIT is a quoted company used as a collective investment vehicle to hold rental property. A REIT is exempt from corporation tax on qualifying income and gains from rental property subject to a high profit distribution requirement. A REIT provides the same after-tax returns to investors as direct investment in rental property by eliminating the double layer of taxation at corporate and shareholder level which would otherwise apply.

In the Finance Act 2016, the former Minister for Finance, Deputy Noonan, introduced measures to address concerns about the use of certain vehicles by non-resident investors in the Irish property market. Section 22 of the Finance Act 2016, which amended section 110 of the Taxes Consolidation Act 1997, was introduced to address concerns about the use of the section 110 regime by non-resident investors for the distressed debt that they had purchased from financial institutions. In response to concerns that section 110 was being used to erode the State's taxing rights on Irish property, the Finance Act 2016 restricted the use of the section 110 regime to remove the ability of section 110 companies to use what are known as profit participating notes to extract Irish property or distressed debt profits out of the company in a way that ensured little or no Irish tax liability arises. The Finance Act 2016 also introduced a new regime for the taxation of Irish funds holding Irish real estate known as the Irish real estate fund or IREF. The legislation was introduced to address concerns raised regarding the use of collective investment vehicles by non-resident investors to invest in Irish property. IREFs must deduct a 20% withholding tax on certain property distributions to non-resident investors.

Additional information not given on the floor of the House.

I am of the view that the taxation regimes remain appropriate for these entities. As the REIT regime is designed to prevent a double layer of taxation and the amendments in the Finance Act 2016 were designed to protect the State's taxing rights over property, these are not favourable tax regimes nor is there an evidential link between these tax regimes and property supply issues.

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