Under the current system, Irish domiciled investment funds and Irish domiciled life assurance products are subject to the gross roll-up regime. Under the gross roll-up regime for investment undertakings, Investment Undertaking Tax (IUT), commonly referred to as an exit tax, must be deducted on the occurrence of a chargeable event and on the occurrence of a deemed disposal.
The majority of Irish domiciled funds will deduct IUT on the happening of a chargeable event and return it to Revenue; and Irish investors self-assess tax on certain Irish fund investments and on offshore funds through their annual tax return.
In relation to the obligations of Irish domiciled funds, IUT must be operated by the fund on the occurrence of a chargeable event in respect of an investor (other than an investor that is exempt from the operation of IUT). The fund will, in principle, be required to deduct an amount of tax on any payment made to an investor in respect of the chargeable event. Where no payment is made by the fund to the investor in respect of any of the above (for example, on a deemed disposal), the fund is usually entitled to appropriate or cancel the required number of units to meet the tax liability.
Pursuant to section 739F(2) of the Taxes Consolidation Act 1997, domestic funds are required to make two returns of IUT per year to Revenue: in relation to chargeable events occurring in the period from 1 January to 30 June, the tax must be paid by 30 July of that year, and in relation to chargeable events occurring in the period from 1 July to 31 December, the tax must be paid by 30 January of the following year.
The obligation to make a return of tax arises irrespective of whether the fund has been required to operate any IUT i.e. nil returns of tax are required. Revenue collects data on the receipts of IUT from funds arising from chargeable events but, as there is no legislative requirement to do so, does not require funds to report specific detailed data on the allocation of IUT across the various categories of chargeable events, nor on the underlying investors in the funds.
An Irish fund does not operate IUT in respect of any units that are held in a clearing system. Instead, the investor must self-account for any tax arising through the self-assessment system. Similarly, Irish investors are required to self-account for tax in relation to investments in offshore funds. This includes self-assessing for any tax arising on the happening of the eight-year deemed disposal. The Form 11 is the tax return for self-assessed individuals to declare tax due on chargeable events on certain Irish and offshore funds under the self-assessment system.
As the Deputy will appreciate, the availability of timely and reliable data is essential for effective analysis of tax policy. However, it must be acknowledged that increasing reporting requirements for taxpayers to collect additional data may, ultimately, increase administration and compliance costs for taxpayers.
While my Department is committed to increasing the availability of data for tax policy analysis where possible, any impact and potential additional administrative burden that increased reporting may cause, must be considered prior to any change to reporting requirements. Given the existing reporting requirements in place I do not intend, at this point in time, to add any additional reporting requirements. As I have previously noted, my officials are examining whether other data sources may assist in terms of providing more information on deemed disposal returns.
