A 20% withholding tax on distributions from Irish regulated property funds (IREFS) was introduced in 2016. The new regime is complex and generated significant press commentary. The 20% withholding tax did not apply to profits derived from land which was held for 5 years. This was intended to encourage non-speculative investment. The exemption was only available to very limited classes of investors. Maples did not advise clients to place significant reliance upon it, given the complexity of the provisions.
The Minister for Finance announced on 24 October that the 5 year exemption will be further amended and there must be a concern that it will in fact be abolished. Investors who had sought to rely upon this exemption will be obviously concerned at a possible repeal of this provision. However, Maples' view is that this is not expected to be of significant impact, given the narrow scope of the original exemption.
This change is consistent with other measures to eliminate tax incentives related to the holding of land. In a non-regulated structure, previously a capital gains tax exemption was available if the property was held for 7 years. This has now been shortened to 4 years in a separate development.