Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

I just want to address the issue of the deductibles. The Finance Act 2013 introduced the regime for REITs. I have addressed the fact that it cannot be a close company. We had a good conversation about that and we went into private session at one point to go into the details. In general the trading profits of companies is subject to corporation tax at 12.5%. Rental profits and corporation tax in relation to these is at 25%. Rental profits arising from REITs are exempt from corporation tax provided the REIT distributes at least 85% of its annual rental profits. Profits from any other activities within a REIT are subject to corporation tax in the normal way.

I am advised by Revenue that while a REIT must distribute 85% of its annual rental profits, the Companies Act sets out the amount of profits that a REIT has available for distribution. In accordance with the Companies Act and taking a REIT which has rental profit, the profits available for distribution by the REIT would be the rental income of the REIT less all expenses of the REIT, including but not limited to local property tax, remuneration including bonuses and asset manager fees. It is important to note that a REIT does not get a tax deduction for the local property tax. In calculating the amount of a dividend a REIT is able to pay, the local property tax gets deducted along with other expenses paid. This reduces the amount of dividends a REIT can pay. The expenses come out of the profits. Therefore, the profits available for distribution are the profits after deducting all expenses incurred. The investors are then taxed on the profits as distributed.

I gave a commitment to look into the matter of providing information to Deputies on Report Stage but I have been told that I am disallowed from going there and I have to adhere to that.

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