RSM Ireland

Acquiring Irish Real Estate

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

Deductibility of costs
Interest costs on loans for the purchase of real estate are deductible in full against rental income on commercial real estate. Interest costs on loans used to purchase residential real estate were restricted up to 2018; however, no restriction is applied from 2019 tax year on.

For the deductibility of such interest costs to be allowed against residential rental income, it is a requirement that the landlord registers the relevant residents with the Irish Residential Tenancy Board.

Generally, pre-letting expenses are not allowed as a deductible expense in arriving at taxable rental profit and the circumstances where some such expenses are deductible, are very limited.

Capital Allowances (Tax Depreciation)
Capital allowances are only available for expenditure on ‘Industrial Buildings’ and relevant Plant and Equipment. There is a standard rate of 4% per annum straight line for most industrial buildings and 12.5% for Plant and Equipment.

Irish tax legislation provides that an industrial building or structure means a building or structure in use for the purpose of a trade to include a mill, a factory, a laboratory for mineral research, a dock, a structure used for growing fruit and market gardening, a hotel, a structure used for intensive production of livestock, an airport and supporting buildings, a nursing home, a hospital, a sports injury clinic, a mental health centre and a palliative care unit. The legislation also provides that an industrial building will include any building or structure provided by the person carrying on such a trade or undertaking for the recreation or welfare of workers employed in that trade or undertaking and in use for that purpose.

Capital allowances are not available in respect of Offices or Retail Real estate. There may be a refund/clawback in the form of a balancing allowance/charge where the real estate is disposed of within its tax life (typically 25 years), calculated based on the difference between the consideration received and the tax written down value of the building.

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 same rules for Stamp Duty as for individuals apply.

Value-added tax

The same rules as for individuals apply.

Deductibility of costs

The same rules as for individuals apply.

Non-resident companies

Stamp Duty

The same rules as for individuals apply.

Value-added tax

The same rules as for individuals apply.

Deductibility of costs

The same rules as for individuals 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.

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

The same rules as for residential individuals apply.

Value-added tax

The same rules as for residential individuals apply.

Non-resident companies

Stamp Duty

The same rules as for individuals apply.

Value-added tax

The same rules as for individuals apply.

 

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