Pearse Doherty (Donegal, Sinn Fein)
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155. To ask the Minister for Finance the expected revenue from ending the capital gains tax exemption from the sale of property held in REITs. [21181/18]

Pearse Doherty (Donegal, Sinn Fein)
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157. To ask the Minister for Finance the expected revenue from introducing a minimum dividend withholding tax rate of 25% on all dividends paid by REITs. [21183/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 155 and 157 together.

Finance Act 2013 introduced the regime for the operation of Real Estate Investment Trusts (REITs) in Ireland. The function of the REIT framework is not to provide an overall tax exemption but rather to facilitate collective investment in rental property by removing a double layer of taxation which would otherwise apply on property investment via a corporate vehicle.

Property rental income and gains arising are exempt from tax within the REIT and are taxed at the investor level when distributed. The legislation requires that 85% of all property income profits be distributed annually to shareholders. The REIT is subject to corporation tax on income and gains not arising from the property rental business of the REIT.

I am advised by Revenue that information in respect of potential future capital gains from the sale of property of REITs is unavailable, I am therefore unable to provide an accurate estimate of the potential revenue to be obtained from the ending of the exemption. It is also worth noting that REITs are specifically designed to focus on the long-term holding of income producing property and contain provisions to encourage the re-investment of property sale proceeds in new property rental assets. REITs are not designed to hold development activities, or as a vehicle for short term speculative gains.

With regard to withholding tax on REIT dividends, Deputies will be aware that, in the absence of any other provisions, foreign REIT shareholders in treaty partner countries would not have had any liability to Irish tax on REIT dividends. In order to ensure that tax from foreign investors is retained, a Dividend Withholding Tax (DWT) at the standard rate of tax (20%) was legislated for to specifically apply to REIT dividends. Foreign investors from treaty resident countries may be able to reclaim some part of this DWT if the relevant tax treaty allows for this. The taxation of dividends varies from treaty to treaty, but commonly a source state would retain the right to approximately 15% tax on dividends paid from that state.

Due to this interaction with tax treaty reliefs, and also taking into account the fact that information in respect of potential future annual distributions from REITs to investors is not available, an accurate estimate of the potential revenue from an increase in the withholding tax rate applicable to any such distributions cannot be made.

Pearse Doherty (Donegal, Sinn Fein)
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156. To ask the Minister for Finance the expected revenue from ending the dividend withholding tax exemption for non-resident IREF shareholders from dividends related to the sale of property held in an IREF for five years. [21182/18]

Pearse Doherty (Donegal, Sinn Fein)
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158. To ask the Minister for Finance the expected revenue from introducing a minimum dividend withholding tax rate of 25% on all dividends paid by IREFs. [21184/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 156 and 158 together.

The Irish Real Estate Fund (IREF) regime was introduced by Finance Act 2016. In general terms, the regime provides that profits arising to Irish funds from Irish property remain within the charge to Irish tax. An IREF is an investment undertaking where 25 per cent or more of the value of the assets of the undertakings is derived from real estate assets in the State. Where a unit holder receives value from the IREF, an IREF withholding tax of 20% will generally apply. There are a number of exceptions from the operation of this withholding tax such as for pension schemes and charities as they are more generally exempt from tax.

On introduction, the IREF regime provided for an exemption from IREF withholding tax on the distribution of profits that arose from holding Irish land or buildings for more than 5 years. Finance Act 2017 introduced legislation to remove the CGT exemption within the IREF regime from 1 Jan 2019. This amendment was not revenue raising in nature, but designed to ensure that tax provisions did not encourage land hoarding.

The first payment of IREF withholding tax and the filing date for the first return for the majority of these funds is 30 July 2018. At that point, depending on the number of IREFs, it may be possible to identify the quantum of profits from long term land holdings that were distributed during 2017.

However, I am advised by Revenue that information in relation to the potential sale of property held by an IREF or future distributions made by IREFs is not available to enable an accurate estimate of the potential revenue from the changes mentioned by the Deputy.