Finance Act 2017

Irish real estate funds

19. (1) Chapter 1B of Part 27 of the Principal Act is amended—

(a) in section 739K—

(i) in subsection (1)—

(I) in paragraph (c) of the definition of “IREF assets”, by inserting “, which are actively and substantially traded on such stock exchange,” after “stock exchange”,

(II) by deleting paragraph (a) of the definition of “IREF excluded profits”,

(III) by inserting the following after the definition of “IREF withholding tax”:

“ ‘PRSA’ means a Personal Retirement Savings Account within the meaning of section 787A;”,

(IV) by inserting the following after the definition of “purchased IREF profits”:

“ ‘qualifying intermediary’ means an intermediary (within the meaning of section 739B(1)) who is authorised by the Central Bank of Ireland under—

(a) before 3 January 2018, the European Communities (Markets in Financial Instruments) Regulations 2007 ( S.I. No. 60 of 2007 ), and

(b) on and after 3 January 2018, the European Union (Markets in Financial Instruments) Regulations 2017 ( S.I. No. 375 of 2017 );”,

(V) in the definition of “specified person”—

(A) by substituting the following for paragraph (a):

“(a) a fund approved under section 774, 784(4) or 785(5), an approved retirement fund within the meaning of section 784A, an approved minimum retirement fund within the meaning of section 784C, a PRSA (including a vested PRSA within the meaning of section 790D(1)) or a person exempt from income tax under section 790B (collectively referred to in this Chapter as ‘pension schemes’),”,

(B) by substituting the following for paragraph (b):

“(b) an investment undertaking, or, where appropriate, a sub-fund that is a unit holder in another sub-fund of the same umbrella scheme,”,

(C) in paragraph (f), by substituting “pension scheme” for “scheme” and “pension schemes” for “schemes”, and

(D) in paragraph (g), by substituting “valid declaration made by the unit holder or, where applicable under subsection (1A), by the qualifying intermediary,” for “valid declaration,”,

and

(ii) by inserting the following after subsection (1):

“(1A) A qualifying intermediary who carries on a trade which consists of, or includes, the holding in a nominee capacity of units in an IREF, that is not a personal portfolio IREF, on behalf of unit holders (that come within paragraphs (a), (d) or (e) of the definition of ‘specified person’, or within paragraph (f) of that definition pursuant to its reference to paragraph (a) thereof), may make a declaration in accordance with Schedule 2C, on behalf of those unit holders in respect of that IREF.”,

(b) in section 739M(3), by substituting “pension scheme, undertaking” for “scheme, undertaking” in each place where it occurs,

(c) in section 739N—

(i) in subsection (1)(b), by substituting “pension scheme” for “scheme”, and

(ii) by inserting the following after subsection (3):

“(4) An IREF (referred to in this subsection as the ‘first mentioned IREF’) shall not be treated as a personal portfolio IREF of a unit holder which is an IREF (referred to in this subsection as the ‘second mentioned IREF’) where the holding of the units—

(a) in the first mentioned IREF by the second mentioned IREF is for bona fide commercial purposes, and

(b) is not part of a scheme or arrangement the main purpose, or one of the main purposes of which, is the avoidance of tax.

(5) Section 29(3) shall not apply to the disposal of an asset which derives its value, or the greater part of its value, directly or indirectly from units in an IREF.”,

(d) in section 739O—

(i) in subsection (1), by substituting “person, or connected persons within the meaning of section 10,” for “persons”, and

(ii) in subsection (2)(b) by substituting “unit holder who is a specified person” for “unit holder”,

(e) in section 739P(1)(a), by substituting “subject to section 739QA, the IREF shall” for “the IREF shall”,

(f) in section 739Q—

(i) in subsection (3), by substituting “pension scheme” for “scheme” in each place where it occurs, and

(ii) by inserting the following after subsection (4):

“(5) (a) No repayment of withholding tax may be made pursuant to subsection (3) where the IREF taxable profits, to which the IREF taxable amount is referable, arose prior to the pension scheme, undertaking or company indirectly investing in the units in respect of which the IREF taxable event occurs.

(b) No repayment of withholding tax shall be made pursuant to this section other than where it would be reasonable to consider that the repayment arises from transactions or arrangements, which were carried out for bona fide commercial reasons, and do not form part of an arrangement of which the main purpose, or one of the main purposes, is the avoidance of tax.”,

(g) by inserting the following sections after section 739Q:

“Advance clearance procedures for indirect investors in respect of withholding tax

739QA. (1) A person who is entitled to a full refund of any withholding tax under section 739Q(3) (in this section referred to as the ‘indirect investor’) may, in advance of an IREF taxable event in respect of which withholding tax under section 739P or section 739T would arise, apply to the Revenue Commissioners for a certificate that—

(a) withholding tax should not be deducted in respect of an IREF taxable event, or

(b) withholding tax deducted should be paid directly to the indirect investor.

(2) The details of any IREF taxable event in respect of which a certificate is provided under subsection (1), notwithstanding that tax is not withheld under section 739P or 739T, shall be included on the account delivered under section 739T(3)(c), or the return required under section 739R, as applicable.

(3) An application under subsection (1) shall be made in such form as is provided from time to time by the Revenue Commissioners and shall include such particulars as may be set out in that form including the following:

(a) details of the indirect investment in the units of an IREF;

(b) why the IREF would not be considered a personal portfolio IREF of the indirect investor concerned;

(c) the withholding tax that will be suffered;

(d) confirmation that the withholding tax is not otherwise repayable;

(e) confirmation that the indirect investor would not be a specified person if it was a unit holder in the IREF;

(f) confirmation that the indirect investor would be entitled to a refund of tax under section 739Q(3).

Advance clearance procedures for direct investors in respect of withholding tax

739QB. (1) A person who is entitled to a full refund of any withholding tax under section 739T(6) may, in advance of an IREF taxable event in respect of which withholding tax under section 739T would arise, apply to the Revenue Commissioners for a certificate that withholding tax should not be deducted in respect of an IREF taxable event.

(2) The details of any IREF taxable event in respect of which a certificate is provided under subsection (1), notwithstanding that tax is not withheld under section 739T, shall be included together with the account delivered under section 739T(3)(c).

(3) An application under this section shall be made in such form as is provided from time to time by the Revenue Commissioners and shall include such particulars as may be set out in that form including the following:

(a) details of the investment in the units of an IREF;

(b) why the IREF would not be considered a personal portfolio IREF of the unit holder;

(c) the withholding tax that will be suffered;

(d) confirmation that the unit holder is not a specified person; and

(e) confirmation that the unit holder would be entitled to a refund of tax under section 739T(6).”,

and

(h) in section 739T(2), by substituting “Subject to sections 739QA and 739QB, on payment” for “On payment”.

(2) Schedule 2C to the Principal Act is amended by inserting the following after paragraph 8:

“Declaration of qualifying intermediaries regarding Approved Retirement Funds or Approved Minimum Retirement Funds

9. The declaration referred to in section 739K, in respect of an Approved Retirement Fund or an Approved Minimum Retirement Fund referred to in paragraph (a) or (f) of the definition of ‘specified person’ in that section, is a declaration in writing to the IREF which—

(a) is made by a qualifying fund manager (in this paragraph referred to as the ‘declarer’),

(b) is signed by the declarer,

(c) is made in such form as may be prescribed or authorised by the Revenue Commissioners,

(d) declares that, at the time of making the declaration, the units in respect of which the declaration is made—

(i) are assets of an Approved Retirement Fund or an Approved Minimum Retirement Fund, and

(ii) are managed by the declarer for the person who is beneficially entitled to the units,

(e) contains the name, address and TIN of the person referred to in subparagraph (d)(ii),

(f) contains an undertaking by the declarer that if the units cease to be assets of the Approved Retirement Fund or an Approved Minimum Retirement Fund, including a case where the units are transferred to another Approved Retirement Fund or an Approved Minimum Retirement Fund, the declarer will notify the IREF in writing accordingly,

(g) contains a certificate by the declarer stating whether or not the unit holder is a specified person after the application of section 739M,

(h) provides, where the Approved Retirement Fund or an Approved Minimum Retirement Fund is one to which paragraph (f) of the definition of ‘specified person’ applies, supporting documentation evidencing equivalence,

(i) contains an undertaking by the declarer that if the Approved Retirement Fund or an Approved Minimum Retirement Fund becomes a specified person, the declarer will notify the IREF in writing accordingly, and

(j) contains such other information as the Revenue Commissioners may reasonably require for the purposes of Chapter 1B of Part 27.

Declaration of PRSA administrators regarding PRSAs and vested PRSAs

10. The declaration referred to in section 739K, in respect of a PRSA or a vested PRSA referred to in paragraph (a) or (f) of the definition of ‘specified person’ in that section, is a declaration in writing to the IREF which—

(a) is made by a PRSA administrator (in this paragraph referred to as the ‘declarer’),

(b) is signed by the declarer,

(c) is made in such form as may be prescribed or authorised by the Revenue Commissioners,

(d) declares that, at the time of making the declaration, the units in respect of which the declaration is made—

(i) are assets of a PRSA or a vested PRSA, and

(ii) are managed by the declarer for the person who is beneficially entitled to the units,

(e) contains the name, address and TIN of the person referred to in subparagraph (d)(ii),

(f) contains an undertaking by the declarer that if the units cease to be assets of the PRSA or the vested PRSA, including a case where the units are transferred to another PRSA or vested PRSA, the declarer will notify the IREF in writing accordingly,

(g) contains a certificate by the declarer stating whether or not the unit holder is a specified person after the application of section 739M,

(h) provides, where the PRSA or vested PRSA is one to which paragraph (f) of the definition of ‘specified person’ applies, supporting documentation evidencing equivalence,

(i) contains an undertaking by the declarer that if the PRSA or vested PRSA becomes a specified person, the declarer will notify the IREF in writing accordingly, and

(j) contains such other information as the Revenue Commissioners may reasonably require for the purposes of Chapter 1B of Part 27.

Declaration of qualifying intermediaries regarding certain specified persons in section 739K(1)

11. The declaration referred to in section 739K, in respect of a qualifying intermediary, is a declaration in writing to the IREF which—

(a) is made by a qualifying intermediary (in this paragraph referred to as the ‘declarer’),

(b) is signed by the declarer,

(c) is made in such form as may be prescribed or authorised by the Revenue Commissioners,

(d) contains the name and address of the declarer,

(e) declares that, at the time of making the declaration, the unit holder in respect of which the declaration is made—

(i) is a scheme to which paragraph (a) or (f) of the definition of ‘specified person’ applies,

(ii) is a charity to which paragraph (d) of the definition of ‘specified person’ applies, or

(iii) is a credit union,

(f) contains an undertaking by the declarer that where the declarer becomes aware at any time that the declaration made in accordance with subparagraph (e) is no longer correct, the declarer will notify the IREF in writing accordingly, and

(g) contains such other information as the Revenue Commissioners may reasonably require for the purposes of Chapter 1B of Part 27.”.

(3) (a) Subsection (1)(a)(i)(II) shall apply to disposals occurring, or unrealised profits or gains recognised in the income statement, on or after 1 January 2019.

(b) Subject to paragraph (a), this section shall apply to IREF taxable events occurring on or after 19 October 2017.