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

Irish Property Investors The way we invest: Annual Tax or exit 20% over 5 years Growth rate is 5% per annum

Irish Property Investors 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 company 3.‘Pension’ Investment 4.Offshore funds/ Syndicated Investments- Foreign Partnership/Co- Ownership - Non-resident company

Irish Property Investors 1 & 2 – Direct purchase personally or Irish Resident Company Personal46.5% 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)

Irish Property Investors 3, Pension Investment (a) Corporation Tax 12.5% (b) Pension exempt on Income/gains 46.5% on income when received in retirement (Quarter of fund value tax free on retirement date) Irish Trading Company Directors Pension Self Administered Foreign Property Investment Director/Shareholder (a) (b) (c) Director Income Gains

Irish Property Investors 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

Irish Property Investors Fund Managers * Unregulated foreign company Bank Purchase & hold property Country B Irish Investors (each less than 1%) €20m Equity €80m Debt Rent 20% Syndication Example * Not subject to regulations similar to Irish FSRA Central Bank – eg. Unit Trusts

Irish Property Investors 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 20%

Irish Property Investors 61% Syndication Example *Regulated entity e.g. unit trust Purchase and hold property Irish Investor Equity * Subject to IFSRA equivalent

Irish Property Investors 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%

Irish Property Investors 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

Irish Property Investors