Finance Act 2016 introduced a new regime for the taxation of Irish property funds known as Irish Real Estate Funds, or IREFs. It imposed a new 20% withholding tax on distributions from Irish real estate funds. The legislation is complex and attracted significant press commentary. Over €10bn of Irish real estate was estimated to be held in such vehicles with many large international investors involved in the sector.  

Revenue has recently released guidance notes on the new legislation. These are intended to illustrate Revenue's view on the legislation at a practical level. The guidance is principally focused on anti-avoidance rules, known as the "personal portfolio IREF" or "PPIREF" rules. Certain classes of investors are exempt from the 20% withholding tax. The exemptions are very narrow. They do not apply where the investors can select or influence the business of the regulated fund. The intention was to penalize those who were perceived as using regulated funds as "private" investment vehicles. 

The Revenue guidance reflects this very restrictive legislative approach. Investors, or advisors, who had perhaps expected Revenue to adopt a more benign approach may be disappointed. There are, as one source commented "no back-doors". In our view, that is not surprising, given that the legislation has been in force for over 9 months now.

That aside, the Revenue guidance is noteworthy for the clear practical examples which it provides. These will be helpful to advisors and investors who seek to apply these complex legislative provisions in calculating their tax liabilities over coming years.