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Can I Purchase a Property with my ARF?

coins with wooden house Annuity or ARF

Can I Purchase a Property with my ARF?

The simple answer is Yes – an ARF can hold or invest in property assets. This form of investment has been gaining traction over the past few years for a number of reasons:

  • Over the long term Property is a solid investment asset and
  • It provides an annual income

A ARF Fund can invest in almost any type of asset you can reasonably invest in. For example stocks and shares, government bonds, cash, and of course property. In most cases where individuals are invested in property via their ARF it is in the form of a property fund run by a particular insurance company. The property fund may be valued at many hundreds of millions and owns large amounts of commercial property around Ireland.

However an ARF structure can also own an individual piece of property chosen by you.

For example, you identify a piece of property that you think represents a good long term investment and if your ARF is set up correctly your ARF purchases the selected property.

There are Revenue conditions that you must comply with. Such conditions include:

  • All rental income from the property is paid into the ARF and not to you
  • You cannot benefit from the property whilst it is held by the ARF – for example you cannot use it as a holiday home or private residence for yourself
  • You could not make it available as a holiday home for family or friends

Failing to adhere to Revenue rules in this respect can lead to very serious consequences.

On the plus side, rental income from the property paid into the ARF fund is not liable to income tax, PRSI and USC as you are not receiving the rental income – your ARF is receiving the rental income. Remember you are however taxed when you withdraw some of this income from the ARF fund.

Purchasing an individual piece of property may indeed make sense as it is a means to diversify your pension assets for retirement, but it should certainly not be the only asset in your ARF as history has shown that investing in property has the potentially to be costly as well as lucrative.

For more information or if you have any questions, you can call Joanne on 01 5267770 or email jfenelon@arfireland.ie

Comments 6

  1. So property purchase via ARF is tax efficient as you avoud exit tax , and also rental income tax. You only pay income tax, prsi and USC on the mandatory 4% you have to take out annually .

    I also understand not liable for any CGT upon selling house .. so to benefit from zero tax on sale of house what is the mandatory minimum holding period before one could sell at zero tax liability ?

    1. Post
      Author

      Hi Mal,

      Yes, it is possible to purchase investment property within a Self Administered ARF.
      When an ARF sells an investment property, there is no CGT payable by the ARF, regardless of how long the ARF has owned the property.

      Kind Regards,

      Kind Regards,

      Jim Doyle ACMA QFA CGMA

  2. To whom it may concern,

    I have money in a PRSA, but it is not enough to purchase a house. Can I use it to set up an ARF and which then is used to purchase 50% of a house?

    Thanks

    Pat

    1. Post
      Author

      Hi Pat,

      In principle it is possible to purchase either whole or a share of a property in a PRSA or in an ARF.
      However there are numerous conditions that would need to be satisfied regarding the nature of the property and the 50% ownership not in the PRSA or ARF.
      We will email you directly with a few questions suited to your particular situation,
      Regards, Joanne

    1. Post
      Author

      Hi Gerry, thank you for your comment, Our Financial Manager Michael Coburn is going to email you directly with a response to this question.

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