Matheson Tax Update: Ireland Publishes Finance Bill 2013

Author:Mr Turlough Galvin, Gerry Thornton, Joe Duffy, Alan Connell, Aidan Fahy, Shane Hogan, John Kelly, Emer Hunt, Greg Lockhart, Alan Keating, Mark O'Sullivan, John Ryan and Catherine Galvin
Profession:Matheson
 
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The Irish Finance Bill was published yesterday afternoon (13 February 2013). Although it contains a number of technical changes that would potentially have an impact upon our international companies and financial institutions clients doing business in and through Ireland, the changes are not terribly drastic and in most cases are positive. A quick overview of the most relevant changes is as follows:-

FINANCIAL INSTITUTIONS

FATCA

As has been previously announced, Ireland was one of the first countries in the world to conclude an Inter-Governmental Agreement with the United States in relation to FATCA. The Finance Bill provides for the ratification of this Agreement and also includes provisions to enable the Revenue Commissioners to make regulations providing for the collection of necessary information from financial institutions and for the exchange of such information with the United States. These regulations are expected to be published over the coming months.

Real Estate Investment Trusts

As has also been previously announced, Ireland is introducing a tax regime for Real Estate Investment Trust (REIT) companies. It is hoped that the introduction of REITs will attract foreign investment into the Irish real estate market and establish Ireland as a hub for the management of international real estate. The Finance Bill sets out the tax legislation that will underpin the REIT companies.

Subject to certain criteria, including a requirement to distribute 85% of its property income by way of dividend, the REIT will be exempt from tax in respect of the income and chargeable gains of a property rental business. The REIT must derive 75% of its aggregate income from this property rental business. It may carry on other “residual” business, but the tax exemption applies only to the income and chargeable gains of the property rental business. Dividends paid by the REIT will be subject to dividend withholding tax (unless exempted under one of Ireland's 68 tax treaties), and will be taxable in the hands of the shareholders.

Investment Limited Partnerships

Irish Investment Limited Partnerships (ILPs) are a form of regulated Irish fund. Historically, ILPs have been rarely used, partly because they have not been treated as tax-transparent, as normal partnerships would be. The Finance Bill amends the tax treatment of ILPs to ensure that they are tax-transparent. This change is expected to allow the Irish regulated funds sector to compete globally...

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