Pearse Doherty
Ceist:284. Deputy Pearse Doherty asked the Minister for Finance the total direct taxation raised from the investments funds sector in 2023; and if he will make a statement on the matter. [3057/25]
Amharc ar fhreagraWednesday, 5 February 2025
Ceisteanna (284)
Freagraí scríofa
There are a range of collective investment vehicles within the investments funds sector, and I am advised by Revenue that it is not possible to separately identify the tax associated with that sector.
However, the aggregate amounts of taxes paid by entities within the investment funds sector, and other entities within the financial and insurance sectors for 2023 is contained in a statistical publication, entitled ‘Revenue net receipts by Sector’, which is available on the Revenue website:
www.revenue.ie/en/corporate/information-about-revenue/statistics/receipts/receipts-sector.aspx.
By way of information for the Deputy, Irish collective investment vehicles (investment funds), which are authorised and regulated by the Central Bank of Ireland, are generally taxed under the gross roll-up regime. This means that the investment undertaking is exempt from tax on the profits it earns on behalf of its unit holders. The profits are allowed to grow on a tax free basis within the fund and are taxed at the level of the investor rather than the fund, as is standard international practice.
Under the gross roll-up regime, investment undertakings are subject to Investment Undertaking Tax (“IUT”). This tax is deducted at source by the investment undertaking and paid over to Revenue on behalf of the unitholder. The amount of exit tax to be deducted is calculated by applying a rate of tax to the gain arising on the chargeable event. One example of a chargeable event that would give rise to IUT is the making of a distribution to a unitholder. In general, IUT does not apply to non-resident investors provided the relevant declarations are in place with the investment undertaking.
Irish Real Estate Funds (“IREFs”) are collective investment undertakings where 25% or more of the value of their assets is derived from real estate in the State. These special types of investment fund have a specific withholding tax applied such that unit holders in an IREF are subject to IREF withholding tax at a rate of 20% on payments made to them by the IREF. As with IUT, the IREF withholding tax is deducted by the IREF and paid to Revenue on behalf of the unit holder. Unlike IUT, non-resident unit holders are also be subject to IREF withholding tax. In some circumstances the non-resident can make a claim to Revenue that the IREF withholding tax can be reduced under the terms of a double taxation treaty. However, if a unit holder in an IREF holds more than 10% of the assets of the IREF, any payment from the IREF will be regarded as from immoveable property and the IREF withholding tax deducted cannot be reduced.
In addition to a 20% IREF withholding tax on distributions, Finance Act 2019 introduced a charge to income tax at the level of the IREF in certain circumstances in order to prevent the use of excessive debt and other payments to reduce distributable profits as an anti-avoidance measure.
For both the gross roll-up regime and the IREF regime, certain categories of investors such as pensions schemes, companies carrying on life business and charities are exempt from IUT and IREF withholding tax provided the appropriate declarations are in place. This exemption is provided as these categories of investor are more generally tax exempt.