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

Section 23 of the Finance Act 2016 introduced a new tax regime for funds that hold Irish real estate to be known as Irish real estate funds, IREFs. The section was introduced to address the use of certain fund vehicles to invest in Irish property by non-resident investors. IREFs are investment undertakings, excluding undertakings for collective investment in transferable securities, UCITSs, where 25% of the value of that undertaking is made up of Irish real estate assets. Where the main purpose of the fund is to invest in Irish property, this will also fall into the regime regardless of the level of property. Where an IREF makes an actual distribution or on the redemption of units in the IREF, non-resident investors will be subject to a withholding tax of 20%. Certain investors such as pension funds, life assurance companies, charities and credit unions are exempt from the withholding tax as this is the norm for such bodies across the tax acts. The new regime applies to accounting periods beginning on or after 1 January 2017. I am advised by Revenue that the first returns from IREFs will be filed in the middle of next year. If any areas of concern are identified, they will be addressed. I am also advised that my Department has been working with the Central Statistics Office, CSO, to get a more granular breakdown of the non-household buyer category classification into further categories. However, it will be March 2018 at the earliest before this information is available.

Real estate investment trusts, REITs, were introduced by the Finance Act 2013. The regime provides for a collective investment vehicle for persons wishing to invest in property. REITs must be widely held as it is a requirement that the REIT not be a "close company", that is, a REIT cannot be under the control of five or fewer persons. A REIT must hold at least three properties and carry on a business of letting property. No one property may account for more than 40% of the total value of the property in the REIT. The REIT must derive at least 75% of its profits from property rental and must distribute at least 85% of its property income to shareholders.

I understand from the Revenue Commissioners that as there are only three REITs in Ireland at present, for reasons of taxpayer confidentiality it will not be possible for Revenue to share the information sought with the Senator or indeed me. However, I understand that Revenue's large cases division has a dedicated team who look after REITs. As the REIT regime was introduced in the Finance Act 2013, that team is, as part of Revenue's normal compliance review process, reviewing the structures of those REITs and the tax payable by those companies. Should any issues arise from the review, Revenue will bring those matters to the attention of my officials.

I wish to advise the Senator that on Committee and Report Stages in Dáil Éireann I agreed that certain issues raised in amendments tabled by Deputy Pearse Doherty in respect of IREFs and REITs would be examined by the tax strategy group. However, given the constraints in respect of availability of information and taxpayer confidentiality, it would not be appropriate to put the preparation of the requested reports into legislation. I cannot commend these recommendations to the Seanad but I can assure the Senator that both the IREFs and REITs are being kept under constant review.