Ireland has a system of withholding tax operating in respect of Irish investors in Irish funds. This does not apply to non-Irish residents, provided certain declarations are obtained.
In a significant move to decrease the costs of administering Irish funds, the Irish tax authorities have published rules that will enable Irish funds to dispense with the non-resident declaration (“NRD”) requirement to avoid the withholding tax.
Prior to this, each fund investor was required to complete a NRD to confirm that they were not Irish tax resident. Following a significant lobbying effort by the Irish funds industry, the Finance Act 2010 contained a measure that would dispense with the requirement for non Irish residents to complete an NRD.
The requirements in order to avail of this waiver to complete an NRD are:
- the fund undertakes not to actively promote units/shares for sale in Ireland. The Irish tax authorities acknowledge that it is not possible to prohibit a fund from being marketed to Irish residents. Where the fund receives an application from an investor who has an Irish address or bank account the fund is required to treat the investor as Irish tax resident unless they complete the relevant NRD;
- the terms and conditions on the application form must outline the obligation of each investor to notify the fund if the investor becomes Irish resident;
- the fund must undertake to fully comply with all its obligations under Irish tax law and Revenue Commissioners’ practice, including its requirements in relation to Irish residence or ordinary residence of investors.
Any fund wishing to apply for waiver from the NRD requirement should apply to the Financial Services Unit of the Irish tax authorities confirming their compliance with these conditions and enclosing a copy of the application form.