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Funds with Irish assets facing tougher taxation

By Donal O'Donovan

Funds that own billions of euro of Irish property and loan assets are likely to be hit in Irish Finance Minister Michael Noonan's Finance Bill today.

The prospect of a tougher tax regime has been seen by some in the property sector as leading to a decline in investor appetite.

However, a long list of bidders for Nama's so-called Project Gem suggests demand for Irish assets remains robust.

Cerberus - which bought Nama's Northern Ireland portfolio in the controversial Project Eagle deal - and Oaktree are understood to be among a longer list of prospective buyers of €3bn of loans being sold by Nama in its Project Gem disposal.

It is a portfolio of predominantly commercial mortgage loans and is secured by 392 properties, mostly in the Republic of Ireland.

First round bids are now in for the loans, which have a face value of €3bn (£2.7bn), but are likely to sell for well below that level.

Even so, the bids coming ahead of the new tax regime for funds suggests investors remain interested in assets in the Republic. The idea is to levy the tax on Irish income generated by the assets regardless of where the owners are domiciled.

The move to beef up taxes on property income follows public disquiet at the tax-free profits being generated by mostly big American funds that bought Irish assets at knockdown prices in the crash.

The new tax regime is expected to apply to structures used by those investors to cut their taxes, in some cases to nothing, including qualifying investor alternative investment funds (QIAIFs), Irish collective asset management vehicles (Icavs) as well as so-called Section 110 companies.

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