Pearse Doherty (Donegal, Sinn Fein)
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69. To ask the Minister for Finance if he is satisfied that REITs and IREFs are paying a fair share of tax; and if he will make a statement on the matter. [25527/19]

Paschal Donohoe (Dublin Central, Fine Gael)
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Institutional investors represent one aspect of the property market and have an important role in increasing supply, particularly the supply of urban apartments.

Notwithstanding this fact, the Government monitors the actions of investors in the market and has taken action when abuses have been identified.  The Deputy will be aware that action was taken in 2016 to address concerns about the use of section 110 and fund vehicles by foreign investors to take profits derived from Irish real estate without paying Irish tax.

This resulted in the introduction of the IREF (Irish Real Estate Fund) framework in 2016.  IREFs are investment undertakings, excluding UCITS, where at least 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 also falls into the regime regardless of the level of property held. 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 Real Estate Investment Trust (REIT) framework was introduced in 2013, to facilitate long-term, risk-diversified, collective investment in rental property. The rules relating to REITs in Ireland are found in Part 25A of the Taxes Consolidation Act 1997. In order to be a REIT, a company must be listed on the main market of an EU stock exchange within three years of forming, and it must be widely held. Irish REITs are collective investment vehicles which invest in Irish property. As such, their income and gains from Irish property are not taxed within the REIT but are instead taxed in the hands of the investor when distributed. REITs must distribute at least 85% of their property profits to their shareholders each year. A REIT is subject to corporation tax on any income or gains arising from any other business (i.e. non-property business) that it carries on.  

Dividend withholding tax at 20% must be applied to all distributions from REITs, other than distributions to certain limited classes of investors such as pension funds and charities as they are more generally exempt from tax.

I am satisfied with the tax regimes applicable to REITs and IREFs, however given the important implications which developments in the property market can have for the economy, my Department actively monitors developments in this sector on an ongoing basis. As part of the 2018 Finance Act process I committed to conduct a review of REITs, IREFs and section 110 companies as they invest in the Irish property market. Officials in my Department are currently preparing this report, which is to be presented to the Tax Strategy Group in July.