Mick Wallace (Wexford, Independent)
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9. To ask the Minister for Finance his views on the considerable tax exemptions that can be availed of by non-resident investors regarding dividend withholding tax; if this will minimise the effects of the tax following the introduction in the Finance Bill 2016 of a dividend withholding tax for non-resident investors in certain property investment funds; and if he will make a statement on the matter. [34049/16]

Mick Wallace (Wexford, Independent)
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I ask the Minister to outline his views on the considerable tax exemptions that can be availed of by non-resident investors regarding dividend withholding tax. Given that he introduced a 20% withholding tax on dividends paid to foreign investors in certain property investment funds as a way to catch investors who pay no other tax in Ireland, surely this has been on the mind when they are able to avail of relief on the very same tax.

Michael Noonan (Limerick City, Fine Gael)
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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.

Mick Wallace (Wexford, Independent)
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I struggled to hear all of the Minister's answer.

It has been confirmed to me that non-resident investors may seek relief from the newly enacted 20% withholding tax if they are resident in a county with which Ireland has a double-taxation agreement through section 172D of the Taxes Consolidation Act 1997. We have double-taxation agreements with 72 countries at the moment. I think the Minister went through the details of how it works with countries such as the US.

I may have misunderstood the Minister; has he tabled an amendment to the Finance Bill on the matter or is he saying it is not worth the Department's bother trying to do it differently? I would have thought it would be a good idea to completely remove the exemptions from dividend withholding tax for non-resident investors. Has the Minister addressed that in the Bill?

Michael Noonan (Limerick City, Fine Gael)
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We are familiar with the conversation that has taken place in recent months about property investment funds. A section of the Finance Bill dealing with the issue is being debated in Committee this week and next week to deal with the issue. We published legislation back in September and people had a chance to use that as a consultation document and make comments on it. In addition, where section 110 was used for the legitimate reason for which it was introduced in the first place for securitisation purposes, if the securitisation fund has more than 25% of a property's valuation, then a withholding tax will apply to a distribution. However, there is no crossover between that provision and the dividend withholding tax. Therefore the exemptions available under the dividend withholding tax do not apply. However, we are speaking in a bit of a vacuum because I have filed a new section incorporating a significant number of amendments to the Finance Bill on Committee Stage and it has not yet been discussed. Where it lands is a matter for the House and for the committee in the first instance.

Mick Wallace (Wexford, Independent)
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I have tabled a few amendments on the section and I will attend the committee when section 22 comes up for discussion.

With regard to REITs, there also a withholding tax of 20% on dividends paid to foreign investors and, again, the relief is available. I see that the Minister has informed the European Parliament committee hearing on Tuesday that he had been informed by the EU Commissioner for Competition that there were no further pending State aid cases against Ireland. I find this confusing because I wrote to the EU Commissioner for Competition regarding the exemptions for non-resident investors in Irish REITs and whether they breach EU state aid rules. The Commissioner for Competition confirmed to me, on 21 October, that the Irish tax regime for REITs is under assessment by the services of the Directorate General for Competition. Perhaps the Minister for Finance will clarify if I am right in thinking that the builders and developers' challenge to NAMA being allowed to build 20,000 houses is because it might amount to State aid, or has that gone off the radar?

Michael Noonan (Limerick City, Fine Gael)
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I am aware that there is some challenge initiated by developers against the proposal and the policy of the Government that NAMA would build 20,000 houses to help with the supply shortages of residences, particularly in Dublin. I do not have any idea how that case is proceeding.

With regard to Deputy Wallace's query on REITs, where relevant payments are made to non-resident investors, the non-resident investors may also be able to seek relief from the dividend withholding tax if they are resident in a country with which Ireland has a double taxation agreement. That is a standard feature of double tax treaties and is based on the OECD model tax convention. I am sure Deputy Wallace is familiar with the notion that one does not pay tax twice in different jurisdictions on the same profit. It is paid once and where there are double taxation agreements it is paid in the country in which the person is tax resident. If a person pays in the other country then he or she gets a credit against their tax liability in their country of residence.

Mick Wallace (Wexford, Independent)
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Has the Minister looked at the Dutch assessment of the OECD-----

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Maybe the Deputy could have that conversation afterwards as we have to move on.