NoRegretsCoyote
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Private Landlord | Institutional landlord | |
Rental profit | €500k | €500k |
Distributed profit (>85% for institution) | €500k | €500k*85%= €425k |
Corporation tax 0% | €0 | €0 |
Taxable profit | €500k | €425k |
Personal tax @52% marginal rate | €260k | €221k |
After tax income | €240k | €224k |
CGT 33% | Applied to capital gain on property | Applied to capital gain on share price (gains within the REIT exempt) |
Private Landlord | Institutional landlord | |
Rental profit | €500k | €500k |
Distributed profit (>85% for institution) | €500k | €500k*85%= €425k |
Corporation tax 0% | €0 | €0 |
Taxable profit | €500k | €425k |
Withholding tax (20% for private landlords, 25% for institutions) | €500k*20%=€100k | €425k*25%=€106k |
After tax income | €400k | €319k |
CGT 33% | Applied to capital gain on property | Applied to capital gain on share price (gains within the REIT exempt) |
I think this more related to purchasers of distressed debt, and I think the loophole was closed at the end of 2016:I thought that some of the international institutional investors were registered as charities and so they paid no tax?
Minister for Finance Michael Noonan has signalled that he plans to bring forward measures in the upcoming Finance Bill restricting so-called vulture funds' use of tax-efficient fund structures to hold property.
....
In his Budget 2017 speech, Mr Noonan noted how he moved last month to clamp down on the use of special purpose vehicles, or section 110 companies, by private equity firms to hold property loans acquired in Ireland during the financial crisis. SPVs are typically designed to produce little or no taxable income on assets held in these structures.
Indeed that was the rationale, yes. The question often comes up on AAM "should I buy this property through a company or hold it personally?" and the answer is always to hold it personally.If they abolished the REIT treatment, then property investment would be done by ordinary companies and the shareholders would pay tax twice. The purpose of the REIT was to allow individuals invest in property units on the same basis as individuals buying their own properties.
Gordon where did you get your information on the IRA agenda was it from the army councilThis is just the Sinn Fein/IRA agenda and misinformation at play again.
REITs are DESIGNED to be tax neutral!
They’re a means to democratise property investment and to allow “the little guy” to invest smaller amounts (e.g. €5,000+) and get exposure to property as an asset class but with the diversification of owning hundreds or indeed thousands of properties.
It makes perfect sense for the tax charge to arise at shareholder level. So if I make a gain on shares in REIT, it’s taxed at 33% and if I get a dividend from a REIT, it’s taxed at my marginal rate. The whole exercise is meant to simulate “real” property investment and make it more accessible for the individual.
Sinn Fein/IRA’s Budget 2023 document provides for 33% tax on gains at REIT level, which makes no sense based on the above.
My guess is that the fact that Irish residential rental yields are 6%-7% and are the highest in Europe plays a big part.why are there so many REITs with foreigner investors with huge amounts of money involved?
why are there so many REITs with foreigner investors with huge amounts of money involved?
Not tax free, as distributions subject to a DWT of 25% .But does it allow non-residents to invest in Ireland tax-free?
I think so.Ah, so the REIT must deduct 25% tax on payment of the dividend?
Non-resident investors are: subject to DWT on ─ property income dividends, and ─ distributions paid out of the proceeds of the disposal of a property used in the property rental business from a REIT,
The measures to clamp down on tax avoidance by Irefs were introduced as part of Budget 2020. Immediately following their introduction, the tax paid by institutional investors rose by 171 per cent to €65.7 million on a taxable amount of €369 million, an effective tax rate of 17.9 per cent in 2020.
New data released by the Revenue has shown that the effective tax rate has fallen to 5.9 per cent after Irefs paid €36.8 million tax on a taxable amount of €621 million in 2021.
I think the changes introduced in 2020 tightened up how debt and interest was allowable against profits, which caused the increase in taxable receipts.Irefs are generally subject to a 20 per cent withholding tax on the occurrence of what is deemed a taxable event. Such a taxable event can be defined as any way in which the value of the profits of the Iref are passed onto a shareholder, including a relevant payment that is akin to a dividend. The Iref taxable amount is the profit element of that payment.
They aren’t investing on the same basis at all, REITs have been a dreadful proxy for the housing marketHi Coyote
I thought that some of the international institutional investors were registered as charities and so they paid no tax?
But you raise an interesting point. A REIT may pay no tax, but the individual shareholder does pay tax.
If they abolished the REIT treatment, then property investment would be done by ordinary companies and the shareholders would pay tax twice. The purpose of the REIT was to allow individuals invest in property units on the same basis as individuals buying their own properties.
Brendan
Probably because they have suffiicient leverage to borrow more.If they really are tax neutral, and expose the investor to more tax as detailed above, why are there so many REITs with foreigner investors with huge amounts of money involved? Surely they would have just gone after more tax efficient stocks with their long term dividend rates?
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