VAT exemption for management of non-Irish EU Funds

The Finance Bill includes legislative changes which would bring the management of certain funds, namely (i) undertakings for collective investment in transferable securities (UCITS) and (ii) alternative investment funds (AIFs), authorised by EU Member States outside of Ireland, within the scope of the Irish VAT exemption for management of specified investment funds.

The principal impact of this change would be that fund managers in Ireland engaged in the management of such funds would no longer be entitled to VAT recovery on costs relating to this activity.

Provision is also made for the removal of the VAT exemption for "agency services" related to the management of specified investment funds. These changes are due to take effect from the date of passing of the Finance Act. 

VAT exemption for management of Section 110 companies

The withdrawal of the VAT exemption for services comprising the management of qualifying companies within the scope of Section 110 of the Tax Consolidation Act 1997 and which hold qualifying assets comprising of plant and machinery is proposed in the bill. The VAT exemption for the management of Section 110 companies holding other forms of qualifying assets, including financial assets and commodities, is not impacted by the proposed change. The change is due to come into effect on 1 March 2023.

Interests in Irish Unit Trusts

Irish investors with a material interest in an offshore fund may be subject to special taxation regime in respect of their income and gains. Under existing offshore fund rules an interest in certain Irish registered unit trusts will be considered an interest in an offshore fund where the trustees are not resident in Ireland.

The Finance Bill proposes an amendment whereby Irish unit trusts will not be treated as an offshore fund even if the trustees are resident in another EU or EEA Member State so long as the trustees provide their trustee services to the unit trust through a branch in Ireland and the general administration of the unit trust is ordinarily carried on in Ireland. This amendment is welcome as it removes a historic uncertainty about the classification of such funds as domestic or offshore. 

Reporting for certain fund vehicles

The Finance Bill provides for some amendments to the existing reporting requirements for Exempt Unit Trusts (EUT), Common Contractual Funds (CCF) and Investment Limited Partnerships (ILP). Under the current rules, EUT, CCFs and ILPs must provide an annual statement to the Irish Revenue Commissioners containing certain information about their profits. Such funds must also provide certain details in respect of their investors. Additional reporting requirements for these funds will include an obligation to provide details of their business activities and net asset value.

At present the trustees of an EUT are liable to a €3,000 penalty fail to submit an annual statement or submit an incomplete or incorrect statement. The bill extends these provisions to the management company of a CCF and the partners of an ILP.

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