French SCPIs Investing In Irish Property

• Published date: 29 May 2023
• Subject Matter: Real Estate and Construction, Tax, Real Estate, Landlord & Tenant - Leases, Income Tax, Corporate Tax
• Law Firm: Maples Group
• Author: Mr William Fogarty, Andrew Quinn, Lynn Cramer, Diarmuid Mawe and Craig Kenny

French société civile de placement immobilier ("SCPIs") represent an active and growing sector of the Irish real estate market.

SCPIs have been acquiring Irish assets in the residential, logistics and office sectors for a number of years, however activity has increased in recent months.

As existing owners adapt to life in the Irish property market and new entrants plan acquisitions, it is useful to summarise some aspects of Irish tax law which should be considered.

Irish Tax on Rental Income

Typically, the SCPI will acquire the Irish real estate directly or by using an intermediate holding company. In each case, it is likely that Irish tax law will have informed the choice.

Prior to 2022, there was an Irish tax advantage to using a non-resident company. An Irish resident company was subject to tax at 25% on its rental profits. By contrast, a non-resident company was subject to tax at 20%. The non-resident company was also outside the scope of certain Irish rules which limited deductions for debt.

However, in 2022, this difference in treatment was removed. Non-Irish landlords are now required to register for Irish corporation tax and to file Irish corporation tax returns. They are also subject to Irish corporate tax rules, such as the interest limitation rule, which can restrict the tax deductibility of interest in certain cases. It is important that these changes are modelled and considered over the coming months in order to ensure the potential additional Irish tax obligations are complied with.

Irish Collection Agents

Prior to 2022, tenants were obliged under Irish law to deduct 20% from their rental payments to non-Irish resident landlords. Typically, an Irish rent collection agent (such as the local property agent) would be appointed. This removed the withholding tax.

In 2023, under new tax laws, this process will change. The changes include a requirement on the part of the collection agent to transmit additional information to the Irish Revenue. A new tax withholding platform will be implemented on the Revenue's website. Irish Revenue has begun writing to collection agents and non-Irish landlords concerning these changes, which are expected to come into effect from 1 July 2023.

Non-Irish landlords should review the terms of their engagement with their Irish collection agent when the detail of the new legislation is published in order to ensure there is no disruption to the receipt of rent or information.

EU Law Impacts

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