Finance Bill 2008

Author:Mr Sean Murray
Profession:Dillon Eustace
  1. Investment Undertakings (Funds) - Key Amendments

    The Finance Bill 2008 (as initiated) was released yesterday

    31st January 2008 and there have been some welcome amendments

    included to assist the funds industry in administering the 8

    year deemed disposal rules.

  2. 8 Year Deemed Disposals

    Section 36 of the Finance Bill amends the operation of the

    eight-year deemed disposal provisions for Irish resident or

    ordinarily Irish resident investors ("Irish

    Resident") as introduced by Section 50 of

    the Finance Act 2006. While the legislation is quite complex,

    in summary the new amendments provide that the administrative

    burden of applying the onerous 8 year deemed disposal

    provisions should for the most part lie with the Irish Resident

    investors where they account for a small proportion of the

    fund's (or the sub-fund's in the case of an umbrella

    scheme) overall investments.

    The main provisions are as follows:

  3. De Minimis level Where taxable Irish

    Residents hold less than 10% of the fund (calculated by value

    of shares) or in the case of an umbrella fund, 10% of the

    sub-fund (calculated by value of shares), then the obligation

    to account for the tax on any gain arising on an 8 year

    deemed disposal will be the responsibility of the investor on

    a self assessment basis (as opposed to the fund or its

    service providers) i.e. the investor will be required to

    include the relevant details in their annual return and

    account for the tax themselves. This however, will only apply

    provided (i) the fund has made an appropriate election and

    (ii) it provides in each year of assessment a statement to

    the Revenue Commissioners in electronic format approved by

    them, certain details for each unit holder (including a nil

    return, where applicable) by the 31st of March in the year

    following the year of assessment.

  4. Repayment of Excess "first

    tax" - Where taxable Irish Resident investors

    hold less than 15% of the fund (calculated by value of

    shares) and a refund of tax arises (e.g. subsequent loss on

    an actual disposal) and the fund has made an appropriate

    election, the amount of excess first tax over the

    "second tax" will be repaid by the Revenue

    Commissioners to the relevant investor rather than by the

    fund (on receipt of a claim by the investor). This removes

    the responsibility of the fund or its service providers

    having to track the tax over the lifetime of the units and

    puts the onus on the unit holder to claim the refund directly

    from the Revenue Commissioners.

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