Draft REIT legislation welcomed by property industry

There has been a general welcome from the property industry for the draft REIT legislation included in the recently published Finance Bill.

REITs are seen as a way for investors to have the benefit of owning property through a company rather than as a direct landlord or involvement in a syndicate.

The key aspects of the draft legislation include the provision that the property rental business must be in a normal Irish company listed on the stock exchange.

Other conditions include the provision that a minimum income distribution of 85 per cent is required to qualify. Income received by Irish shareholders in a REIT is taxed at normal tax rates including PRSI, universal social charge and capital gains tax (CGT).

CGT on share sale gains will be taxed at the normal rate – 33 per cent. In the case of corporate investors, income will be taxed at 25 per cent and gains at 33 per cent.

The terms of the legislation also stipulates that no CGT will be paid on disposal of shares by non-residents.

However, dividend withholding tax will apply to overseas investors though tax treaty arrangements may apply.

There will also be limitations on borrowings and development of REITs.

A number of prominent figures in the property and investment industry have expressed satisfaction that the draft legislation seems to tick all the boxes that are needed to enable the the development of a REITs industry in Ireland.

The terms outlined in the Finance Bill are similar to those in the UK legislation but also include updated conditions recently added to the original UK regime set up in 2007.

More information about REITs is available from the REITs Forum website, irishreits.ie