Finance Bill sets tax on property vulture funds at 20%
The Finance Bill published yesterday contained plans to tax vulture funds following an outcry over ways overseas investors used loopholes in Irish real estate funds and Section 110 of the 1997 Taxes Consolidation Act to avoid paying any tax on profits made from the sale of assets.
The 25% rate will specifically apply to special purpose vehicles (SPVs) using Section 110 loopholes. A withholding tax of 20% will apply to investors designated as Irish real estate funds.
In changes to the taxation of Irish real estate funds, which comprise funds holding 25% of their assets in Irish property, the bill seeks to ensure “that the Irish tax base is protected where Irish property transactions are taking place within collective investment vehicles”.
These funds must deduct a 20% withholding tax involving non-resident investors.
Recent Central Bank figures showed there were 822 tax-efficient SPVs based in Ireland, at the end of 2015, involving a total of €324bn in assets.
In last week’s budget, the Government said it expected to yield €50m in the first year of the Section 110 restrictions.
John O’Leary, tax partner at PwC, said that despite exemptions many overseas funds which bought since the crash would be affected. The Finance Bill also outlined a series of other measures.
These include anti-avoidance measure implementing what the bill refers to a “bona-fide test” to prevent people avoiding capital gains tax by using non-resident trusts.
The amendment comes after the EU Commission voiced its concerns over the effects on the free movement of capital.
The capital gains tax — CGT — relief to help fishermen decommission vessels has been extended, as part of a drive to encourage more owners to use the scheme.
The bill also enacts the obligation on Revenue to share certain types of information with other EU states.
The Revenue will also make some changes to its regular publication on tax defaulters’ list, including measures to distinguish people who pay up and showing when people have made partial disclosures of defaults.
Revenue also plans to improve its PAYE online service.
On excise duties, operators of some kinds of heat and power plants will be fully exempted from carbon tax and permission will be granted to start using natural gas for transport.
The National Concert hall will be exempt from stamp duty in any land deals following a change in its company status.
The Finance Bill measures were “as advertised,” said Peter Vale, tax partner at Grant Thornton.
