REITs - Finance Bill 2013

REITs - Finance Bill 2013

The Minister for Finance, in the Budget 2013 announced that provisions would be introduced to enable the establishment of Real Estate Investment Trusts (REITs) in Ireland. The Finance Bill published on Wednesday, 13th of February 2013 contains comprehensive provisions for the introduction of a tax regime to enable the establishment of REITs in Ireland.

This is a progressive and welcome development which should provide significant modern collective investment ownership structure at a time when Irish real estate is attracting considerable investor interest. There may be some amendments to the Bill but at present it is similar to the UK legislation (including updates recently added to the original UK regime).

Key Aspects
Provided the REIT meets various conditions set out in the legislation, the REIT will not be liable to corporation tax on income and capital gains tax arising from its property rental business. In order to qualify a REIT must be:-

• resident in Ireland and not resident elsewhere;
• be incorporated under the Irish Companies Acts;
• be a listed quoted company which has traded on a main stock exchange in an EU member state and not be a close company (3 year grace period);
• derive at least 75% of its profits from property rental business, consisting of at least 3 properties, no one of which must be more than 40% of the total market value (3 year grace period);
• maintain a 1.25:1 ratio of income to financing costs;
• distribute at least 85% of its income by way of dividend to its shareholders (income does not include capital gains).

Taxation Consequences
Income tax for Irish investors at normal income tax rates including PRSI and USC. CGT on share sale gains at 33%. Irish resident corporate investors will be liable to 25% corporate tax on income distributions from the REIT and CGT at 33%. Non-resident investors will not be liable to Irish CGT however investors may be liable to such taxes in their home jurisdictions.

It is intended that the REIT will apply Dividend Withholding Tax (DWT) at the rate of 20% from income distributions to non- residents. Certain non-residents may be entitled under their tax regimes to recover some of this DWT from Ireland or otherwise should be able to claim a credit for DWT against taxes in their home jurisdictions.
The transfer of shares in the REIT will be subject to 1% stamp duty.

We are Founding Members of the Irish REITs Forum, see www.irishreits.ie

If you would like more information or would like to arrange a meeting to discuss further, please contact Paul McGennis.