PROPERTY INVESTMENT FUNDS are to be hit with tax avoidance clampdown measures tonight.

As part of Budget 2020, Finance and Public Expenditure Minister Paschal Donohoe said that following a review of Irish Real Estate Firms (IREFs), Revenue flagged that some firms are “engaged in aggressive behaviour to avoid tax”.

Tonight, new anti-avoidance measures are to be passed by the Dáil by a financial resolution.

Donohoe told reporters that he has “real concerns” about how these companies are managing expenses and about the level of stamp duty being paid.

What are IREFs and REITs?

IREFs, also known as Real Estate Investment Trusts (REITs) are companies whose main activity is the ownership and management of property-related assets.

These include commercial properties such as offices, warehouses, and hotels, and also residential such as apartments.

“I have concerns about the level of tax they are paying,” said the minister, adding that he has expectations in terms of how tax is paid in Ireland, and therefore has “decided to act on that today”.

“We’re going to change them this evening. I also become aware of issues in relation stamp duty and how it is being paid in relation to transactions within that sector. That needs to change and that forms part of the resolution tonight,” he said.

He stated that these firms do have a role to play in terms of the delivery and building of new houses, but said issues were brought to his attention in relation to apartments and commercial properties.

When asked about the clampdown and what revenues it might raise for the Exchequer, Donohoe said he had not mentioned figures in his Budget speech as the vast majority of transactions that take place are covered by the current and existing tax laws.

“I didn’t put a figure against that, because it’s very difficult for me to make a call at this point,” he said in relation to what amounts of money the new tax avoidance measures might generate.

Sinn Féin’s Pearse Doherty said today that this government “laid out the red carpet to cuckoo funds and speculators” which has resulted in prices being pushed up and young people being “locked out of the property market and locked in to an unaffordable rental system”.

“This Budget appears to have heeded some calls from Sinn Féin in tackling serious tax avoidance among property investors through REITs and IREFs. Not least the Capital Gains exemption for properties sold when they’ve been held by REITs for three years or more,” said Doherty.

He said property funds “have made a fortune from the property crisis” and “used the rules of the game” to avoid paying millions of Euros in tax.

Ibec stated today that the increase in non-residential stamp duty to 7.5% for REITs is “surprising”, while Duncan Lyster, Managing Director of Lisney said:

“Minister Donohoe also spoke of changes to REITs in terms of new taxation measures, particularly in relation to capital gains and the distribution of proceeds from the disposal of a rental property. We don’t as yet have full details on these measures, but we await the specifics with interest.”