Wednesday 18 October 2017

Call for Noonan to close off 'loophole' for investors in Finance Bill

Finance minister Michael Noonan
Finance minister Michael Noonan
Ronald Quinlan

Ronald Quinlan

The Department of Finance will be called on to further tighten the provisions of the Finance Bill to ensure there will be no circumstances in which non-resident investors in Irish property investment funds will be able to avoid the requirement to pay a 20pc Dividend Withholding Tax (DWT) on distributions made to them.

The Sunday Independent understands Independent TD Mick Wallace intends to table a number of amendments to the Dail select committee now examining the draft Finance Bill with a view to closing off a potential loophole in the legislation as it is being considered currently.

Commenting in the course of a recent Dail debate on the Finance Bill's proposed tax treatment of ICAVs and QIAIFS and other investment undertakings included in the Irish Real Estate Funds (IREF) regime, Wallace said the Department of Finance had confirmed to him that "non-resident investors may seek relief from the newly-enacted 20pc withholding tax if they are resident in a country with which Ireland has a double tax agreement".

The Wexford TD noted that Ireland's capacity to raise funding from non-resident investors would be "limited" by virtue of the fact that we have double taxation treaties with 72 countries, including the United States of America.

While the Wexford politician is determined to change a tax regime which he believes to be too generous to international investors, the Finance Bill has been met with concern by the commercial real estate sector.

That concern was reflected last week by consultants CBRE in their latest bi-monthly report, in which they said: "The likelihood is that investment spend will decline from this point forward… not least because of recent tax changes announced in the Finance Bill, which has done huge reputational damage for investment into Ireland… and will unfortunately negatively affect the price that certain funds will pay for Irish real estate assets going forward. It remains to be seen if the pricing of, or demand for loan portfolios including [Nama's] Project Gem and Project Tolka, which are currently on the market, will be negatively impacted by the uncertainty that these recent tax changes have unearthed."

The European Commission's directorate general for competition is assessing a complaint from Wallace questioning whether the exemptions available to non-resident investors in Irish real estate investment trusts (REITs) are in breach the EU's state aid rules. While acknowledging the Commission had already approved tax exemptions for Finnish Reits in 2010, he has pressed for a new inquiry into the specific manner in which the Irish model operates.

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