IRELAND Law and Practice Contributed by: Nicholas Blake-Knox, Jonathan Sheehan, Damien Barnaville and Joe Mitchell, Walkers
ing dealing in or developing land or a property rental business). Where the IREF rules apply, withholding tax (“IREF withholding tax”) at the rate of 20% of the “IREF taxable amount” must be deducted from payments made to unitholders on an “IREF taxable event”, such as a distribution or redemp - tion, and on a sale of shares or units in the IREF. As the regime operates in parallel with the IUT regime, broadly, IREF withholding tax applies in relation to those investors that are exempt from IUT, such as non-Irish resident investors and cer - tain classes of exempt Irish investor. However, certain of those investors are also exempt under the IREF regime. The categories of exempt per - sons are restricted broadly to widely held EEA/ EU regulated pension funds, life assurance com - panies, other authorised funds and their EU/EEA equivalents, exempt charities, credit unions and companies benefitting from the Irish securitisa - tion tax regime in Section 110 of the Taxes Con - solidation Act 1997, as amended. An investor in an EU member state (other than Ireland) or a country with which Ireland has a double tax treaty may reclaim IREF withholding tax under the dividends article of the relevant double tax treaty, and the Irish tax will be reduced to the treaty rate. However, beneficial owners of 10% or more of the shares or units in an IREF (directly or indirectly) are technically precluded from claiming treaty relief as the Irish rules treat the payment from the IREF to such persons as income from immovable property, to which the source country (Ireland) would typically be given taxing rights under a double tax treaty. The Finance Act 2019 introduced further chang - es to the IREF regime, including anti-avoidance provisions that apply a 20% income tax charge at fund/sub-fund level to combat excessive debt
and financing cost deductions, and non-IREF business-related expenses that can reduce the profits that would otherwise be subject to IREF withholding tax on distributions/redemption payments. The debt/financing cost restrictions comprise both a debt-to-cost threshold and a profit financing cost ratio, with financing costs in excess of the applicable ratios being treated as deemed income subject to income tax at 20%. Financing costs on genuine third-party debt are excluded from the provisions. Stamp Duty The transfer of units in an investment undertak - ing (such as an authorised ICAV or investment company), a CCF or an ILP is exempt from stamp duty, but it can apply in respect of the transfer of units in an IREF in certain circumstances. There are three types of Irish investment funds available to retail investors: RIAIFs, Retail Inves - tor ELTIFs and UCITS. Both RIAIFs and Retail Investor ELTIFs are AIFs, as detailed in 2.1.1 Fund Structures , so are not re-considered in detail in this section ( 3. Retail Funds ), which focuses on UCITS as the long- standing standard EU investment fund product available to both retail and institutional investors. UCITS in Ireland can adopt any of the available fund structures, except the ILP. On a legislative basis, UCITS are required to operate on the prin - ciple of risk spreading, regardless of what legal structure is used. 3. Retail Funds 3.1 Fund Formation 3.1.1 Fund Structures
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