Taxes Consolidation Act 1997 section 734

Taxation of collective investment undertakings

Section 734 sets out the taxation regime for collective investment undertakings such as unit trusts and UCITS funds, providing for tax transparency so that the undertaking itself is not taxed but unitholders are taxed on their share of the profits, and requiring withholding tax on payments to Irish resident unitholders.

• A collective investment undertaking (CIU) is exempt from tax on its relevant profits; instead, the profits are taxed in the hands of the unitholders as if the income and gains had arisen directly to them, preserving all reliefs, credits and exemptions the unitholder would otherwise enjoy.
• Where a CIU (other than a specified CIU) makes a relevant payment to an Irish resident unitholder, or has undistributed relevant income at the end of an accounting period, it must deduct withholding tax at the standard rate of income tax; non-resident unitholders are entitled to a full refund of any withholding tax deducted.
• A specified collective investment undertaking (SCIU) is a CIU based in the IFSC or Shannon area whose unitholders (apart from the undertaking itself, its management company, and certain related entities) are all non-resident; an SCIU is not required to operate withholding tax.
• Payments by a CIU that is a company are not treated as distributions, the surcharge on undistributed income of investment companies and discretionary trusts does not apply, and non-resident unitholders cannot be assessed to Irish tax through the CIU acting as their agent.