Deputy Donnelly is calling on government to immediately reverse these proposals in the Finance Bill, and has tabled amendments for committee stage to that effect. Speaking today, he said:
‘So far as I can tell, no other European country provides tax-free status for commercial property. We are in the middle of another commercial property bubble here, businesses are struggling to meet spiralling rents, families are struggling to buy homes, or even rent them, and the State is short of monies needed to invest in public services and infrastructure. And yet, the government is proposing to pour petrol on top of all of this, for no obvious reason.’
- EMEA: Europe, Middle East & Africa
- REIT: Real Estate Investment Trust
- ICAV: Irish Collective Asset-management Vehicle
- QIF: Qualified Investment Fund
Figures on commercial property in Dublin:
- 2nd most expensive commercial property market in the Eurozone; 
- 6th most expensive market in CBRE’s 57 City Commercial Property Survey; 
- Cost to build in line with other 1st world European cities;
- Grade A office buildings now selling for 6.4 times more than they cost to build;
- Only Paris and London have a higher multiple of gross property value to core property build cost in EU;
- Most major 1st world European cities maintain a multiple of 3.5 – 4.5;
- In the last few years alone commercial rent in Dublin has nearly doubled;
- Dublin commercial property is selling for over €1,200 per sq ft, while core Dublin residential property sells for less than half that price (c €500 per sq ft);
- At the height of last bubble, commercial property peaked at around €1,400 per sq ft.
Source of new tax break (making commercial property tax free on income and capital gains):
- The new section in the Finance Bill on IREFs provides full exemption from Capital Gains Tax, CGT, once investors hold the property for at least five years.
- The section on IREFs goes on to apply a 20% Dividend Withholding Tax, DWT, but it excludes nearly all investor types from this tax. There are no other Irish taxes to be paid.
- Over 80% of all future Irish Commercial Property investment will come from foreign Pension Funds, Life Assurance Funds other Collective Investment Undertakings, CIUs;
- CIUs covers a wide range of REITs, unit funds and trusts, mutual funds, UCITs, and almost any other investment structure and institutional investor would use.
Additional new tax break for loans
- Finance Bill allows tax breaks via Section 110, in the domestic economy, for securitised loans;
- This means banks can package up mortgages, commercial and other loans, into securities;
- These can then be bought by foreign funds and operated tax free;
- The effect is substantive erosion of the domestic tax base coupled with influx of cheap foreign capital;
- See Section 5 in policy note for a more detailed explanation.