Pearse Doherty (Donegal, Sinn Fein)
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257. To ask the Minister for Finance the estimated full-year revenue in 2021 that would be raised by introducing a minimum dividend withholding tax rate of 33% on all dividends paid by REITs; and if he will make a statement on the matter. [18767/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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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.

REITs are publicly listed companies - therefore distributions are dividends within the scope of Dividend Withholding Tax (DWT).  From 1 January 2020 a DWT rate of 25% applies. Prior to this date dividends paid and distributions made were liable to DWT at 20%.

I am advised by Revenue that information in respect of dividends from shares in Real Estate Investment Trusts (REITs) is not separately identified in Revenue’s Dividend Withholding Tax (DWT) data and therefore the information requested by the Deputy cannot be provided. In addition, due to information not being available in relation to potential future REIT distributions to investors, an accurate estimate of any potential revenue from an increase in the withholding tax rate could not be made.

The Deputy will be aware that a number of amendments were made to the taxation of REITs in Finance Act 2019, to ensure the regime operates as intended. The obligation to deduct DWT has been extended to include distributions of the proceeds of capital disposals. If the net proceeds from such capital disposals are not re-invested in the REIT business or distributed within a 2 year period, they will become part of the profits of the REIT business, 85% of which must be distributed annually. In addition, the deemed disposal provisions upon cessation of REIT status have been restricted to REITs that have been in operation for at least 15 years, in line with the regime's stated objective of encouraging long-term, stable investment in rental property.

Finance Act 2019 also provided for the introduction of a “wholly and exclusively” test when calculating the REIT profits available for distribution. This test has been introduced to ensure that inflated costs, such as inflated management fees, cannot be used to reduce distributable profits. An expense will only be deductible if it is incurred wholly and exclusively for the purposes of the REIT’s business. Any deductions found to be excessive will be chargeable to tax as Case IV income in the hands of the REIT.