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

Before the Finance Bill, IREFs that held property assets for more than five years were to be exempt from capital gains tax. This year's Finance Bill removes that exemption. As a result, where property assets are sold after 1 January 2019 and gains are distributed to investors, the IREF will apply a 20% withholding tax on those distributions unless the investors are exempt as is the case, for example, with pension funds. This applies regardless of when the asset was bought by the IREF and any realised gains after 1 January are caught.

Amendment No. 27 makes a further technical amendment to deal with the situation regarding unrealised gains. These unrealised gains are recognised in the income statement of an IREF each year and reflect an asset's increase in value but the gains will not be realised until the asset is sold. We are not looking to catch unrealised gains when they are recorded in the income statement each year as we want to catch them when the asset is ultimately sold and the gain is distributed. By making this amendment, we make sure the provision operates as intended and we do not inadvertently catch unrealised gains.

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