Tax Registration and Filing Obligations for Irish Investment Funds: 2013 Update
This updated client briefing (previously circulated in October 2012) sets out the general tax registration and compliance obligations for Irish investment funds together with information on some of the new reporting obligations that have been introduced in 2013.
Irish regulated investment funds ("Investment Undertakings") benefit from Ireland’s very favourable investment funds tax regime. This regime effectively provides that no tax is levied on the profits or gains of Investment Undertakings.
However, notwithstanding that Investment Undertakings may not be subject to any charge to tax in Ireland on its profits, it is important to note that tax filing requirements will still arise for such funds. It is important to consider these filing requirements and compliance obligations at an early stage in the establishment of the fund. The filing requirements and the related services offered by Maples and Calder are described below.
Registration for Tax
- must register for investment undertaking tax; and
- may also be required to register for:
(a) Pay As You Earn ("PAYE" – Irish payroll taxes); and
(b) Value Added Tax ("VAT").
Investment Undertaking Tax
Every Investment Undertaking is required to register for investment undertaking tax within 30 days of commencing business (i.e. within 30 days of authorisation of the Investment Undertaking by the Central Bank of Ireland). This involves filing a registration form with Irish Revenue. Once the Investment Undertaking has been registered it will receive a tax reference number.
Where a corporate Investment Undertaking is making payments of directors' fees (whether those directors are Irish resident or not and whether those payments are made directly to directors or through an intermediate entity) Irish payroll taxes may need to be operated on those fees (unless an exclusion order applies). Irish directorship fees are automatically subject to Irish payroll taxes and the Investment Undertaking will need to register with Irish Revenue for PAYE in order to operate the correct withholding. This is an area of particular focus for Irish Revenue at the moment and care should be taken to ensure that the Investment Undertaking has given proper consideration to its PAYE obligations. It may also be necessary to conduct an analysis of previous years to determine whether the Investment Undertaking has any liability for historic PAYE.
Where the directors of the Investment Undertaking are partners in Irish law or accounting firms, an exclusion order providing that no PAYE need be withheld may be sought from Irish Revenue. However, before such an order can be obtained, Irish Revenue require the Investment Undertaking to register for PAYE.
Where an Investment Undertaking is receiving taxable services from abroad (such as legal or audit services), the Investment Undertaking will be required to self-account for Irish VAT on those services on the reverse charge basis. In these circumstances, the Investment Undertaking will need to register for VAT in Ireland.
Maples and Calder can assist in arranging for the relevant registrations in respect of your Irish investment funds. The Tax Group has broad experience and expertise in advising on all Irish tax matters relating to investment funds. Working closely with our colleagues in the Funds Group and our compliance team in MaplesFS we can provide these tax services in an efficient and seamless manner.
Ongoing Compliance Obligations
Investment Undertaking Tax
An Investment Undertaking is required to make semi-annual returns and payments of investment undertaking tax on an ongoing basis. Broadly, investment undertaking tax will only be payable if the investment Undertaking has non-exempt Irish resident or ordinarily resident investors, or the appropriate declaration procedures have not been complied with. If no investment undertaking tax is payable, the Investment Undertaking is still required to make nil returns. Returns can only be made electronically, so the responsible party will need to register with Revenue's Online System ("ROS") in order to process the returns or appoint a service provider to file the returns on their behalf. MaplesFS tax compliance team can provide these services.
The return periods are 1 January to 30 June and 1 July to 31 December. Returns (and payments of investment undertaking tax, where applicable) are required to be made within 30 days of each latter date.
PAYE (Irish payroll taxes)
Where an Investment Undertaking pays fees to its directors, it is required to make the relevant deductions of PAYE (together with social insurance contributions ("PRSI") and the universal social charge, where appropriate) in respect of those payments. The Investment Undertaking must remit the tax deducted by them under the PAYE system together with the Form P30 to Irish Revenue within 14 days of the end of each month. Where payment is not made on time, interest accrues at a rate of 0.0274% per day.
Where a director of an Investment Undertaking is a partner (who is a solicitor or accountant) of a legal or accounting firm and an exclusion order has been put in place with Irish Revenue, there is still a requirement for PAYE returns to be filed, albeit the returns will show a nil payment obligation in respect of payroll taxes.
Irish Revenue published a briefing in relation to PAYE on directorship fees in December 2011 so this is an area of tax that is very much under scrutiny and care needs to be taken to comply with all relevant obligations in order to avoid any penalties arising.
Where an Investment Undertaking is required to operate Irish VAT on taxable services received from abroad, the general rule is that VAT must be paid and a VAT return filed by the 19th day of the month following each two monthly taxable period (ie January / February and so on). However, where the VAT liability falls under certain thresholds, there may be an option to apply to the Irish Revenue to submit returns on a less frequent basis. Our Tax Group can advise on these options and the extent to which any VAT cost may be recovered.
2013 *NEW* Annual Reporting Requirement
A new reporting requirement for Investment Undertakings introduced in 2013, requires an Investment Undertaking to provide Irish Revenue with certain information about itself and its unit holders. This requirement only applies in respect of unit holders who are not "excepted unit holders". If all unit holders are "excepted unit holders" no return needs to be made, though an email could be sent to Irish Revenue (Planning Division) notifying them that this is the case. This is suggested in the Revenue guidance notes but is not compulsory.
The definition of excepted unit holders is quite broad and includes non-Irish resident investors who have supplied a declaration of nonresidence to the Investment Undertaking, investors who hold their units in a recognised clearing system and certain Irish-resident exempt investors such as pension funds and "section 110" companies.
The returns for the year 2012 must be made by 30 September 2013. For all subsequent years, the return must be filed by 31 March of the following year (e.g. by 31 March 2014 for 2013).
As such, it is important that Investment Undertakings put in place a mechanism to identify whether there are any "non-excepted unitholders" holding units in the fund. If there are, the information which must be returned (electronically via the ROS) is as follows:
- The name, address and tax reference number of the Investment Undertakings;
- The name, address, date of birth and tax reference number of each unitholder and the number used by the Investment Undertaking to identify them; and
- The redemption price (or NAV per unit for certain closed-ended funds) in respect of the investment held by the non-excepted investor as at 31 December in the tax year or on the date of redemption.
In addition, from 1 January 2014, every Investment Undertaking must obtain the Irish tax reference number (if any) of each new unitholder along with documentary proof of same.
For the majority of Investment Undertakings, these reporting requirements should have minimal impact but for those with Irish resident investors who do not hold their units through a recognised clearing system, the Investment Undertaking should put in place a system to identify such non-excepted unitholders, obtain the information necessary and make the appropriate returns to Irish Revenue.
The US Foreign Account Tax Compliance Act is generally designed to impose a new reporting regime in respect of US persons' direct and indirect ownership of non-US accounts. Ireland has signed an inter-governmental agreement ("IGA") with the US to implement FATCA which means that Irish Investment Undertakings will report to the Irish Revenue instead of directly to the IRS. The agreement will increase the amount of tax information automatically exchanged between Ireland and the US.
The Irish regulations implementing FATCA have yet to be finalised but Investment Undertakings should consider whether their prospectus tax section, risk factors and subscription documents should be updated to reflect the potential information gathering exercise that FATCA may impose.
Maples and Calder Tax Services
Investment Undertakings should take tax advice as early as possible in the establishment process in order to avoid any delays in registration or penalties for late tax filings. The Tax Group in Maples and Calder can provide the following advices and services:
- Advising on the application of the Irish tax regime to investment funds and their investors;
- Drafting or reviewing the tax disclosure language contained in the relevant prospectus;
- Advising on the VAT status and VAT recoverability entitlement of Irish investment funds;
- Registering the fund for the appropriate taxes in Ireland; and
- Advising in relation to ongoing Irish tax compliance and tax filing obligations.
Our affiliate business MaplesFS is an independent global provider of specialised fiduciary, accounting and administration services. MaplesFS offers a wide range of expertise in accounting, company management, corporate, fiduciary, trust and fund administration. This close working relationship offers clients the maximum convenience and efficiency in establishing and administering companies, funds and investments. Our colleagues in MaplesFS provide tax compliance services to Investment Undertakings including preparation of investment undertaking tax, PAYE and VAT returns and liaising with Irish Revenue for and on behalf of the relevant investment fund.
For further information on this or any other Tax or Funds matter, please contact the lawyers above or your usual Maples contact.