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Real Estate Investment Trusts (REITs) are recognised asimportant vehicles or property investment inover 30 jurisdictions throughout the world. Irish REITswill be listed on the main market o a recognisedstock exchange in an EU member state and should

have the eect o attracting resh capital into the Irishproperty market and thus improve urther the stabilityo the property market. It will also allow smaller scaleinvestors the opportunityto access quality commercial property returns ina regulated environment.

Key features of the legislation are set out below:

Tax exemption

Tax exemption within the REIT in respect o theincome and chargeable gains o a property rentalbusiness.

A company becomes a REIT when notice is given toRevenue and certain conditions are met.

The provisions allow a REIT to have 100%subsidiaries that also qualiy or the taxexemption.

REIT constitution and ownership

Must be Irish incorporated and tax resident.

Its shares must be listed on a recognised stockexchange in an EU member state.

Cannot be a closely controlled company (unlessowned by certain qualiying investors), such

as pension unds, a QIF and NAMA. Ordinary shares can be o only one class.There can be xed rate non votingpreerence shareholders.

Key conditions

Must derive at least 75% o its aggregate incomerom its property rental business, but the taxexemption applies only to the income andchargeable gains o the property rental business.It can carry on a residual business,as dened, which is taxed in the normal manner.

In addition, 75% o the market value o the REIT

must relate to assets o the property rental business. Within three years o commencement, a REIT

must hold at least three properties, none owhich have a market value exceeding 40%

o the total value o properties o the propertyrental business.

At least 85% o property income (excludingcapital gains) must be distributed to shareholderson or beore the tax return ling date or the

relevant accounting period. Maintain a loan to market value ratio up to a

maximum o 50%.

Where the ratio o property income and propertynancing costs goes below a ratio 1.25: 1 theexcess up to an amount o 20% o the propertyincome, is subject to corporation tax.

In addition, debt levels must not exceed 50% othe market value o the assets o the REIT.

It can hold non Irish assets. Thereore an IrishREIT holding oreign investment property eitherdirectly or via a subsidiary is allowed.

Irish Withholding Tax and tax charges

Property income dividends paid by the REIT aresubject to Irish Dividend Withholding Tax (currentrate 20%), which is taxable in the hands o theshareholders wherever tax resident. For nonresident shareholders, treaty relie should beavailable to mitigate.

A tax charge will arise i the REIT pays a dividendto shareholders with 10% or more o the sharecapital, distribution or voting rights in the REIT(other than qualiying investors ie pensionunds and others as dened) unless reasonablesteps were put in place to prevent the making o

the distribution to such person. A corporation tax charge will arise where a

property asset is developed at a cost exceeding30% o its market value and sold within a threeyear period.

Costs of converting to or transferring assets toa REIT

Stamp duty, which is currently at 2%, will applyto properties acquired. A transer o shares in aREIT will also be liable to stamp duty at a rateo 1%.

Where a company converts to a REIT, whilst there

is no conversion charge, there will be a deemedsale and reacquisition o its assets at market valueon that date. This may not in some cases triggercapital gains given the market is recovering.

Ireland introduces REITLegislation

Finance Act 2013The new legislation is welcome at a time when there issignifcant overseas interest in acquiring Irish real estate.

Leading business advisers

7/28/2019 Deloitte Tax Real Estate Investment Trusts Reits 2013

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Pdraic WhelanPartner, TaxT: +353 1 417 2848E: pwhelan@deloitte.ie

Deirdre PowerPartner, TaxT: +353 1 417 2448E: depower@deloitte.ie

Frank MurrayDirector, TaxT: +353 1 417 2438E: murray@deloitte.ie

Michael FlynnPartner, Corporate FinanceT: + 353 1 417 2515E: micfynn@deloitte.ie

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