Green Reit, the publicly listed Irish property investor, could avoid taxes worth at least €50 million when it sells its valuable Irish property portfolio, Sinn Féin has claimed.
The company recently announced it would sell the entirety of its Irish portfolio, valued at about €1.5 billion. Under legislation introduced in 2013 to encourage institutional investment into the Irish property market, Green Reit does not pay capital gains tax on properties it sells after holding them for more than three years.
Sinn Féin's finance spokesperson Pearse Doherty said that the increase in values within Green's portfolio was such that were there not a capital gains tax CGT "carve-out" for property investors, the State would be in line to benefit from a tax payment of €54 million on the sale of just two of Green's property investments.
According to Mr Doherty’s estimates, the ultimate shortfall to the exchequer arising from the CGT carve-out could be in the region of €100 million, depending on whether the portfolio is sold in a single transaction or assets are sold individually.
Property disposal
The tax loss suggested by Mr Doherty arises from the disposal of two properties. First, Central Park in Leopardstown, which has cost the company a total of €326.2 million in purchase price and capital expenditure since it was purchased in 2014. If the building were sold at the same valuation Green Reit put on it at the end of 2018 – €460.1 million – the tax loss would be €44.1 million.
Similarly, One Albert Quay in Cork, which was purchased in 2016 for €51.3 million, is now valued at €81.3 million. If that price were to be achieved, Mr Doherty said the tax loss to the State would be €9.9 million.
Given the fact that Green Reit was the first real estate investment trust to begin buying up Irish property under the tax-efficient Reit regime in 2013, the Donegal TD said it was likely the company would make significant CGT savings across large swathes of its portfolio.
"For years Fine Gael has defended the Government's policy of exempting international property investors in Reits from paying any tax on gains made from selling Irish property. We are now witnessing the potential damage to the public finances of the Government's refusal to close this CGT exemption."
Economic downturn
As reported earlier this week by The Irish Times, suitors for the Green Reit portfolio include Kennedy Wilson and Irish Life, as well as a variety of pension funds.
The Reit regime, along with other property tax incentives introduced by the State during the economic downturn, has been the target of criticism from those who suggest it is overly generous to investors. Its defenders argue it helped rebuild depressed asset values after the property collapse, encouraged capital to come back into the Irish market, and supported growth in foreign direct investment, and other sectors.
Recently, Taoiseach Leo Varadkar told the Dáil the Government was set to review the suite of tax incentives introduced during the recession as part of the budgetary process for next year. It is understood that the Department of Finance will examine the issue as part of its Tax Strategy Group papers to be issued during the summer.
Green Reit said it had no comment when contacted.
