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The Irish government's Finance Bill includes provisions for the creation of a national real estate investment trust (REIT) market.

The initiative is designed to attract foreign capital and stimulate the ailing property sector.

The REITs will be listed companies exempt from corporation tax on qualifying income, and capital gains tax related to rental investment property. At least 75% of the income of the REIT will have to be derived from property rents and each vehicle will be required to have a minimum of three properties on its books.

The vehicles will be required to distribute 'at least' 85% of their income each year to shareholders.

David Erwin, CEO of capital markets at property consultant Cushman & Wakefield, said this is 'another positive step for the Irish economy which seems to be leading the way in self-help'.

'Ultimately, the UK REITs have provided a very solid base for investors and if they did the same thing to Ireland’s beleaguered property market then that could be a further step to stability,' he added.

Commercial and residential property values in Ireland have started to show signs of stabilising after the record crash of 2006/2007 and yield levels are becoming attractive for international investors. But with Irish banks severely constrained in the credit they can offer to the property sector, international investment capital of the type that could be channelled through REITs would help sustain the momentum of the incipient recovery in the market, according to the European Public Real Estate Association.

Ireland is not the only country turning to the tax-efficient REIT structure as a way to revive a moribond property market. The Spanish parliament approved an amendment at end-December to the country’s existing REIT regime – Sociedades Cotizadas de Inversión en el Mercado Inmobiliario (SOCIMIs) - which reduces the tax payable on profits by these listed companies to zero provided 80% of their earnings are distributed to investors who are then taxed on the dividend payments.