The announcement by Green REIT plc ("Green REIT") that it has initiated a process for the sale of the company, or its portfolio of assets, will attract interest from investors across Europe and the globe. It also raises some interesting tax questions, given the relative novelty of the Ireland REIT tax regime.

Green REIT is one of Ireland's largest publicly traded property companies, with almost €1.5bn of assets. It was one of the first Irish real estate investment trusts, launching in 2013, shortly after the Irish REIT legislation was enacted.

Despite the name "Real Estate Investment Trust", Irish REITs are not trust arrangements. They are companies that have elected into a specific chapter of the Irish tax code. Subject to meeting certain ongoing tests, the corporate entity is exempt from tax on rental income and capital gains. One of the conditions is that the ultimate holding company (or principal company of the REIT) is incorporated and resident in Ireland. It must also maintain a listing of its shares on the main market of a recognised stock exchange in the EU, such as the Irish Stock Exchange, or, until Brexit occurs, the London Stock Exchange.

In a takeover context, these conditions could become material. As set out in the original Green REIT prospectus in 2013, if an Irish REIT is taken over by another Irish REIT, the acquired entity can continue to enjoy the REIT tax exemptions on profits and gains. However, the position is different where an Irish REIT is taken over by an acquirer which is not an Irish REIT. This would include a non-listed Irish entity, or a non-Irish entity. In these circumstances, the acquired REIT may fail to meet the REIT conditions. It would leave the Irish REIT tax regime. Its properties will be treated as having been sold and reacquired at market value for tax purposes at that date. These disposals should be tax-free as they are deemed to have been made at a time when the company was still in the Irish REIT Regime. This will "step-up" the base cost of the assets and mitigate future gains on disposals. International REITs may be attracted to Green REIT's portfolio, however the restrictive nature of the Irish REIT regime may be scrutinised as will the future tax on income and gains from those assets.

A second material tax consideration is likely to be stamp duty. In general, acquisitions of Irish commercial real estate attracts stamp duty of 6%. The transfer of shares in an Irish incorporated entity is subject to stamp duty at 1%. However, as a result of rules introduced in 2018, sales of shares in land-rich companies may be subject to the 6% rate. It is possible that the nature of the assets held by Green REIT, being long term rental assets, will not lead to this charge to stamp duty arising on a share sale. It is also possible that the transfer of the corporate entity could take place via a court-sanctioned scheme of arrangement, which could also result in stamp duty being in inapplicable.

These are merely two potential tax issues but there are likely to be many more on a transaction of this size, which will be one of the largest and most interesting Irish commercial real estate transaction in several years.

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William Fogarty

Partner

+353 1 619 2730

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