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Country - Ireland
Corporate Vehicles
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A. DIRECT INVESTMENT
There exist two ways to effect direct investments in real estate in Ireland: the investment may be carried out without a permanent establishment in Ireland or through a permanent establishment.
1. Investment without a permanent establishment
Minimum capital
Not applicable.
Set-up costs
Not applicable.
Time required to become operative
Not applicable.
Costs per annum for corporate and accounting compliance
VAT paid on investment activities may be recovered therefore it may be recommendable to appoint a VAT representative and file regular VAT declarations.
Corporate governance
Not applicable.
Regulatory control
Not applicable.
Taxation of current income in Ireland
25% on the rental income after deduction is allowed for various expenses (e.g. management charges, interest charges, etc.).
Taxation of distribution of current income to investors
Where rents are paid directly to a person (e.g. landlord) whose usual place of abode is outside the state, withholding tax at the standard rate (currently 20%) is to be withheld by the person making the payment. This is based on the gross rental figure (i.e. before deductions for expenses). The correct rate that the non-resident is subject to is 25% of the net rental income. As such the non-resident is entitled to a credit for the tax deducted by the Irish resident making the payment. A form R185 should be submitted by the foreign landlord with their tax return to obtain credit for the tax retained.
Taxation of capital gains
Sale of real estate assets or participation in real estate.
20% on the gain after deduction for relevant expenses (e.g. legal costs and estate agent fees).
2. Investment through a permanent establishment
Minimum capital
Not applicable.
Set-up costs
Not applicable.
Time required to become operative
Immediately.
Costs per annum for corporate and accounting compliance
VAT paid on investment activities may be recovered therefore it may be recommended to appoint a VAT representative and file regular VAT declarations. In addition an annual tax return will need to be filed.
Corporate governance
Not applicable.
Regulatory control
Not applicable.
Taxation of current income in Ireland
25% on the rental income after deduction is allowed for various expenses (e.g. management charges, interest charges, etc.).
Taxation of distribution of current income to investors
No further taxation or withholding tax.
Taxation of capital gains
Sale of real estate asset or participation in real estate.
20% on the gain after deduction for relevant expenses (e.g. legal costs and estate agent fees).
B. INDIRECT INVESTMENT THROUGH CORPORATE VEHICLES
There are various types of corporate vehicles through which the indirect investment could occur; however, the taxation position will be the same.
Minimum capital
€1
Set-up costs
€1,600
Time required to become operative
5 to 10 days from lodgement of correct documents with The Companies Registration Office.
Costs per annum for corporate and accounting compliance
Accounting required for corporate tax and VAT purposes. Filing of bi-monthly/annual VAT returns required. In addition an annual tax return will need to be prepared. Also preparation of annual financial statements is required.
Corporate governance
Rules will differ depending on whether company is a private or public company and on certain balance sheet/turnover thresholds. Larger companies are required to have annual compliance statements, audit committees, etc. Requirement to have board of directors (at least one Irish resident), company secretary and auditor. Considerable flexibility may be agreed in by-laws on corporate governance. Voting and profit rights freely allocable although there are strict capital maintenance rules and rules on related party transactions. Shareholders can appoint and revoke appointment of directors. Shareholders may have approval rights on management decisions, but management may not lose competence for day-to-day business. The company may be managed by (i) board of directors, (ii) managing director/general manager.
Regulatory control
Not applicable. Normal company law applies.
Taxation of current income in Ireland
25% on the rental income after deduction is allowed for various expenses (e.g. management charges, interest charges, etc.).
Taxation of distribution of current income to investor
(i) Tax-resident shareholder:
Individual
Subject to 20% withholding tax on a distribution. Self-employed individuals are subject to a further 3% PRSI and 2% health levy on their entire income. If income exceeds €100,000 the health levy is 2.5%.
Company
If the distribution is to another resident company it is regarded as franked investment income and is not subject to withholding tax by the distributing company or indeed any further taxation in the hands of the receiving company.
(ii) Non-resident shareholder:
There are many domestic exemptions for payments made to individuals and companies tax resident in an EU country or in a country with which Ireland has a double taxation treaty. Furthermore, payments to companies resident outside the aforementioned countries but which are ultimately controlled by person(s), whether directly or indirectly, tax resident in an EU country or in a treaty country should also be exempt:
- If parent–subsidiary directive is applicable, no withholding tax.
- If parent–subsidiary directive or domestic tax exemption is not applicable, then under a double tax treaty a withholding tax ranging between 5% and 15% is usually applicable.
- If none of the above is applicable, 20% withholding tax applies.
Taxation of capital gains
Sale of real estate asset or participation in real estate
20% on the gain after deduction for relevant expenses (e.g. legal costs).
C. INDIRECT INVESTMENT THROUGH PARTNERSHIPS
We would not recommend this investment type structure.
D. INDIRECT INVESTMENT THROUGH COLLECTIVE INVESTMENT VEHICLES (CIS)
Management company
Legally required for unit trust and CCF type CIS. Not required for VCIC type CIS but often used for such type of scheme.
Minimum capital
Management company: €125,000 or three months' fixed overheads, whichever greater.
Fund: none, but offering document must specify minimum viable size below which CIS will not launch.
Set-up costs
Management company: €1,500.
Fund: €35,000 – 50,000 (approx).
Time required to become operative
Management company: 10 days.
Fund: 6 to 8 weeks (for full authorisation).
A new one-day authorisation process has been implemented for CIS for "qualifying investors".
Costs per annum for corporate and accounting compliance
Will vary depending on size of fund, number of holdings, number of investors, dealing frequency, etc.
Corporate governance
Management company: as B. above, but needs two Irish-resident directors.
Fund: board of directors (minimum of two Irish residents). Delegation of asset management, administration, custody and distribution. Investors' rights dictated by by-laws (trust deed, deed of constitution, memorandum and articles).
Regulatory control
CIS are subject to prior financial regulator authorisation and ongoing financial regulator regulation and supervision. Promoter approval required before CIS can be established. Promoters need not be regulated entities but must demonstrate relevant expertise, fitness, probity and have financial resources of at least €635,000. Discretionary asset managers need not be regulated but must demonstrate relevant expertise, fitness and probity and are subject to prior approval process. Detailed authorisation process – main focus on offering document, custody arrangements and participants (promoter, directors, asset manager).
Prior approval of management company and directors required.
Taxation of current income in Ireland
No taxation of income at the fund level.
Taxation of distribution of current income to investors
Tax-resident unit-holders
The fund must withhold tax at a rate of 20% on distributions (where payments are made annually or at more frequent intervals) or 23% (standard rate plus 3%) on any other distribution or gain arising to the unit-holder. This tax will be a tax liability of the fund, although it is effectively suffered by the unit-holder out of their investment proceeds; this will be set out typically in the offering circular of the fund. As such, from a technical perspective, the fund would register for tax, and may have to pay withholding tax in Ireland.
Exempt Irish tax-resident unit-holders
There are no Irish withholding taxes on distributions made to certain categories of Irish investors known as Exempt Irish Investors (e.g. pension schemes, charities, other funds, etc.) provided particular declarations are put in place confirming exempt status.
Non-tax-resident unit-holders
No taxation of distributions in Ireland (particular declarations need to be put in place confirming non-resident status).
E. RULES ON LEVERAGE
1. CFC and thin-capitalisation rules
Ireland’s tax legislation does not contain any controlled foreign corporation (CFC) legislation, nor does it have any thin capitalisation rules.
2. Withholding tax on interest
Ireland has numerous domestic exemptions from withholding tax on interest payments to non-residents where the rate under a DTA is not sufficient (i.e. 10%/15% as opposed to 0%). Generally speaking, however, the lender would need to be tax resident in an EU country or in a treaty country under a double taxation treaty between Ireland and that country.
F. DOUBLE TAX TREATIES WITH ENTRY JURISDICTIONS
1. Withholding taxes on dividends
| Channel Islands |
0/20% [depending on ownership structure] |
| Italy |
0% |
| Luxembourg |
0% |
| Netherlands |
0% |
2. Withholding taxes on interests
| Channel Islands |
20% |
| Italy |
0% |
| Luxembourg |
0% |
| Netherlands |
0% |
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