brian egan tax partner oliver freaney & company. irish property investors

Brian Egan Tax Partner

Oliver Freaney & Company

Irish Property Investors


Given that:

• Strong overseas Investment likely to continue• Irish market attractiveness has reduced• Strong wealth creation occurred in “Tiger”

years now seeking stable investments opportunities

Then,

Tax mitigation structures have significant role in investment strategy for Irish residents


The way we invest:

• Annual Tax or exit tax @ 20% over 5 years• Growth rate is 5% per annum


• Irish Resident Individual(s)• What are the options?

1. Personal Purchase - - directly acquired by one individual

or an Irish partnership

2. Corporate Purchase - - Acquire property through Irish

resident company3. ‘Pension’ Investment4. Offshore funds/

Syndicated Investments - Foreign Partnership/Co- Ownership

- Non-resident company


• 1 & 2 – Direct purchase personally or Irish Resident Company

• Personal 46.5% 20%(Generally foreign taxes

creditable up to these rates)

• Company 25% 20%Shareholder:- Distributions 46.5%- Liquidation/Share Disposal

20%

Income(Arising Basis)

Capital(On disposal)


3, Pension Investment

(a) Corporation Tax deduction @ 12.5%(b) Pension exempt on Income/gains(c) Tax @ 46.5% on income when received in retirement

(Quarter of fund value tax free on retirement date)

Irish TradingCompany

Directors PensionSelf Administered

Foreign PropertyInvestment

Director/Shareholder

(a)

(b)

(c)Director

Income Gains


4, Offshore funds / Syndicates

• Complex legislation

• Irish tax rates on income/gains can fluctuate between 20% (lowest) to 61% (highest)

• Depends on combination of structure used, investor profile, asset profiles, residence of investment vehicle, (among other factors)

• Optimum tax investment strategy- Minimise foreign taxes- Restrict Capital Gains only over a 5-7 year time horizon- Pay only 20% on exit


Fund Managers

* Unregulated foreign company

Bank

Purchase & hold propertyCountry B

Irish Investors(each less than 1%)

€20mEquity

€80mDebt

Rent

20%Syndication

Example

* Not subject to regulations similar to Irish FSRA Central Bank – eg. Unit Trusts


• Country A is an EU / EEA / OECD country

• No tax on rents as offset by interest costs

• Irish Investors hold shares• Company sells property in say, 5 years

for gain• Exemption from tax on sale in country

A plus no tax on non-residents in country B (e.g.. UK)

• Liquidate company and pay only the Irish Tax @ 20%


61% Syndication

Example

*Regulated entity e.g. unit trust

Purchase and hold propertyIrish Investor

Equity

* Subject to IFSRA equivalent


• Irish investors are unit holders• Unit trust is a “PPIU”• Investors selected the property / not

widely marketed to public • Cashing in units = 43%• Failure to include correctly in tax return

= 61%


What else to consider:

• Foreign exchange risk (tax fragmentation)• Gift / inheritance taxes (Irish legislation gives

credit for foreign tax)• Underlying tax paid by investment vehicle –

credit available?• Buy company or asset (“Inherent” – locked in

tax cost)- Transfer Taxes/Stamp Duty- Capital Duty- VAT recoverability/Cash flow- Interest deductibility / Thin Capitalisation- Capital Allowance / Tax Depreciation- Annual Wealth Tax / Local State Taxes- Legal Complexity / Title

brian egan tax partner oliver freaney & company. irish property investors

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