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Real Estate Investment Trusts

The Finance Bill published on the 13th February 2013 contains detailed provisions relating to the introduction of a Tax regime for REIT Companies in the Taxes Consolidation Act 1997.

As stockmarket companies REITs are well established across Europe and the US. They are a tax efficient way of investing in property.

John Moran the Secretary General of the Department of Finance has been quoted as saying “we see this as producing a way for the Irish obsession with property historically so individualised to be more professionalised”.

The introduction of an Irish REIT may prove opportune as NAMA and the Banks seek to clear their balance sheets by disposing of properties or mortgages. Simultaneously chastened investors search for dividend yielding stocks.

It seems reasonable to sound a note of cautious optimism. However interest will now shift to a close scrutiny of any proposed new fund. This would include an examination of its property portfolio and importantly its management team whose focus one hopes would concentrate on income.

To qualify for the tax regime a company must file a Notice with the Revenue Commissioners. The attached extract refers to the conditions which that Notice must contain. These will be of interest to any party considering investing in a REIT who should take particular advice remembering that the Finance Bill 2013 may change as enacted.

In welcoming this significant development one hopes that individual, national and international interests may coincide and benefit from it.


Conditions for Notice under action 705E 705B.—(1) Subject to subsections (2) and (3), the notice referred to in section 705E shall contain a statement to the effect that—

(a) each of the following conditions, in relation to a REIT or the principal company of a group REIT, as the case may be, is met throughout the specified accounting period, namely—

(i) it is resident in the State and not resident in
another territory,

(ii) it is incorporated under the Companies Acts,

(iii) its shares are listed on the main market of a recognized stock exchange in a Member State, and
iv) it is not a close company within the meaning of Chapter 1 of Part 13,

(b) each of the following conditions, in relation to a REIT or group REIT, as the case may be, is reasonably expected to be met at the end of the specified accounting period, namely—

(i) at least 75 per cent of the aggregate income of the REIT or group REIT derives from carrying on property rental business
(ii) it conducts property rental business consisting of at least three properties, the market value of no one of which is more than 40 per cent of the total market value of the properties constituting the property
rental business,

(iii) it maintains a property financing costs ratio (within the meaning of section 705H(1)) of at least 1.25:1; and

(iv) subject to having sufficient distributable reserves, it distributes to the shareholders of the REIT or the shareholders of the principal company of the group REIT, as the case may be, at least 85 per cent of the property income for each accounting period of the REIT or group REIT, as the case may be, by way of property income dividend, on or before the specified return date for the accounting period in relation to the REIT, or the principal company of the group REIT, as the case may be.

For further information please contact Paddy Donaghy by phone: (01) 6794165 or email: