DIRECT PURCHASE OF REAL ESTATE
This section discusses the most important tax implications of the direct purchase of real estate. First, it discusses the impact for resident individuals and non-resident individuals. Thereafter, it discusses the impact for resident companies and non-resident companies.
Resident Individuals
Transfer Taxes
The acquisition of Irish real estate is subject to a transfer tax known as stamp duty. Stamp duty is payable on transfers of land, buildings and other assets which cannot be passed by delivery. It is chargeable on instruments of transfer executed in Ireland and on instruments, wherever executed, which relate to Irish property or relate to matters done in Ireland.
Liability to tax
Stamp duty is payable on the higher of the consideration paid or market value of the property transferring. Commercial property including land and buildings are subject to a stamp duty rate of 7.5%. Residential property is subject to stamp duty at 1% up to a value of €1m and 2% on values above €1m.
A new stamp duty rate of 10% was introduced from 20th May 2021 onwards on cumulative purchases of 10 or more residential units (houses) in a 12-month period. However, the new legislation provides for the potential for a partial refund of the 10% stamp duty paid where the relevant residential units are leased to a local authority within 24 months for at least 10 years and is executed in favour of a housing authority/approved housing body. The refund results in an effective rate of between 1–2% rate applying.
Value added tax
Basis of tax
Post 1 July 2008, the supply of freehold ‘new’ property is subject to VAT at 13.5%. The sale of ‘old’ property is exempt from VAT, unless the vendor and purchaser exercise a joint option to tax. ‘New’ properties include:
- The first supply of a completed property within 5 years of completion
- The second and subsequent supply of a new property within 5 years of completion, unless it has been occupied for at least 2 years,
- Old property which has been significantly re-developed i.e. made ‘new’ again
Generally, lease interests in property are exempt from VAT (with a landlord’s ‘option to tax’ the rents in certain circumstances i.e. charge VAT at the 23% standard rate).
If the company is not already Vat registered, in order to reclaim any Vat on the purchase of the property, it will be required to Vat register in Ireland.
Irish VAT on property rules are complex and specific advice should be sought in respect of all property related supplies.
Non-resident individuals
Non-resident individuals are treated in the same manner as resident individuals on acquisition
of real estate.
Resident companies
Transfer Taxes
The acquisition of Irish real estate is subject to a transfer tax known as stamp duty. Stamp duty is payable on transfers of land, buildings and other assets which cannot be passed by delivery. It is chargeable on instruments of transfer executed in Ireland and on instruments, wherever executed, which relate to Irish property or relate to matters done in Ireland.
Liability to tax
Stamp duty is payable on the higher of the consideration paid or market value of the property transferring. Commercial property including land and buildings are subject to a stamp duty rate of 7.5%. Residential property is subject to stamp duty at 1% up to a value of €1m and 2% on values above €1m.
A new stamp duty rate of 10% was introduced from 20th May 2021 onwards on cumulative purchases of 10 or more residential units (houses) in a 12-month period. However, the new legislation provides for the potential for partial refund of the 10% stamp duty paid where the relevant residential units are leased to a local authority within 24 months for at least 10 years and is executed in favour of a housing authority/approved housing body. The refund results in an effective rate of between 1–2% rate applying.
Value added tax
Basis of tax
Post 1 July 2008, the supply of freehold ‘new’ property is subject to VAT at 13.5%. The sale of ‘old’ property is exempt from VAT, unless the vendor and purchaser exercise a joint option to tax. ‘New’ properties include:
- The first supply of a completed property within 5 years of completion
- The second and subsequent supply of a new property within 5 years of completion, unless it has been occupied for at least 2 years,
- Old property which has been significantly re-developed i.e. made ‘new’ again
Generally, lease interests in property are exempt from VAT (with a landlord’s ‘option to tax’ the rents in certain circumstances i.e. charge VAT at the 23% standard rate).
If the company is not already Vat registered, in order to reclaim any Vat on the purchase of the property, it will be required to Vat register in Ireland.
Irish VAT on property rules are complex and specific advice should be sought in respect of all property related supplies.
Non-resident companies
Stamp Duty
The same rules as for resident companies apply.
Value-added tax
The same rules as for resident companies apply.
INDIRECT PURCHASE OF REAL ESTATE
This section discusses the most important tax implications of the indirect (shares) purchase of real estate. First, it discusses the impact for resident individuals and non-resident individuals. Thereafter, it discusses the impact for resident companies and non-resident companies.
Resident individuals
Stamp Duty
Individuals do not pay Stamp Duty on an instrument that transfers shares, stocks or marketable securities if:
- the consideration is €1,000 or less and
- the instrument is not part of a larger transaction or series of transactions.
Otherwise, stocks and company shares are liable to stamp duty at 1%. However, shares in certain companies deriving their value from Irish commercial real estate will be liable to stamp duty of 7.5%, where the commercial real estate is held as trading stock or was acquired with a view to realising a gain on disposal.
In addition, a new stamp duty rate of 10% was introduced from 20th May 2021 onwards on cumulative purchases of 10 or more residential units (houses) in a 12-month period. The changes are applicable to stocks and shares in companies that derive value directly or indirectly from residential units (houses).
However, the new legislation provides for the potential for a partial refund of the 10% stamp duty paid where the relevant residential units are leased to a local authority within 24 months for at least 10 years and is executed in favour of a housing authority/approved housing body. The refund results in an effective rate of between 1–2% rate applying.
Value-added tax
The purchase of stocks and shares in companies is vat exempt.
Non-resident individuals.
Stamp Duty
Non-resident individuals are treated in the same manner as resident individuals.
Value-added tax
The same rules as for residential individuals applies.
Resident companies
Stamp Duty
Companies do not pay Stamp Duty on an instrument that transfers shares, stocks or marketable securities if:
- the consideration is €1,000 or less and
- the instrument is not part of a larger transaction or series of transactions.
Otherwise, stocks and company shares are liable to stamp duty at 1%. However, shares in certain companies deriving their value from Irish commercial real estate will be liable to stamp duty of 7.5%, where the commercial real estate is held as trading stock or was acquired with a view to realising a gain on disposal.
In addition, a new stamp duty rate of 10% was introduced from 20th May 2021 onwards on cumulative purchases of 10 or more residential units in a 12-month period. The changes are applicable to stocks and shares in companies that derive value directly or indirectly from residential units (houses)
However, the new legislation provides for the potential for a partial refund of the 10% stamp duty paid where the relevant residential units are leased to a local authority within 24 months for at least 10 years and is executed in favour of a housing authority/approved housing body. The refund results in an effective rate of between 1–2% rate applying.
Value-added tax
The purchase of stocks and shares in companies is vat exempt.
Non-resident companies
Stamp Duty
The same rules as for resident companies apply.
Value-added tax
The same rules as for resident companies apply.
