This Irish tax section considers the key high-level Irish tax considerations for investors who intend to hold Irish real estate for rental purposes and/or for long-term capital appreciation. This section should not be considered to cover all possible Irish tax issues that could arise in relation to such matters. The following comments are principally aimed at individuals and companies holding property let to third parties. There are other methods of owning such Irish real estate available, but the associated tax considerations could be more complex. 

Please note that different Irish tax rules may apply if Irish property is held for resale/trading purposes. This may be found to be the case upon a review of the facts and intentions of the investor or deemed to be so where anti-avoidance rules apply.
 

Tax treatment of income and gains of Irish real estate

Preliminary considerations

An individual will generally be considered an Irish tax resident based on the number of days spent in the Ireland in a given tax year. However, there is a statutory residence test that should be considered. A non-resident individual is an individual not considered Irish tax resident following the application of the statutory residence test.

A company is generally considered Irish resident if it is incorporated in Ireland. Where the company is not incorporated in Ireland, at times when its central management and control is exercised in the Ireland It can be considered Irish resident. A non-Irish resident company may also be within the charge to corporation tax where the company carries on the trade of dealing or developing Irish land or the company has created a permanent establishment. A non-Irish resident company is a company that does not meet the definition of a resident company or is treated as resident in another jurisdiction under the domestic legislation of that jurisdiction and by virtue of an applicable double tax treaty in place between the Ireland and that jurisdiction.

Under Irish law, there are two types of legal interest a person can hold over land being freehold interest and leasehold interest.
1.    Freehold interest - where the person has permanent and absolute tenure over a piece land or property.
2.    Leasehold interest - where the person does not have a freehold interest and is considered to ‘own’ an interest in the property under a legal agreement (i.e., a lease) for a fixed period.
 

To note, where an individual holds a licence of a property it does not give them exclusive possession or right to exclude others from the land. They simply have a contract which allows them some economic use of the land.

Ireland maintains a wide array of anti-avoidance legislation. Many of the transactions considered in this document may be subject to counteraction by such legislation if they are undertaken at other than arm’s length and/or on a non-commercial basis. 
 

Rental income

Individuals 
Irish resident individuals in receipt of rental income are subject to tax on the profits (rental income less allowable expenses) arising from their worldwide property business.

Non-Irish resident individuals deriving rental income from Irish real estate are generally subject to income tax on the profits (rental income less allowable expenses) arising from their Irish property business.  Where rents are paid to a non-resident landlord, the tenant is obliged to deduct 20% withholding tax from the payment, unless the landlord appoints an Irish agent to collect the rents on his/her behalf. From 1 July 2023, there is a new Non-Resident Landlord Withholding Tax (NRWT) system. Collecting agents or tenants will make a Rental Notification (RN) when rent is paid to non-resident landlords. As part of the RN, collection agents or tenants will withhold and remit 20% of the rent payment to Revenue.   This withholding tax may be offset against their Irish income tax liability.

Liability to tax 
Rental income is subject to income tax, the Universal Social Charge (another form of income tax) and PRSI (social security) at the individual’s marginal rate of tax.

Basis to tax
Income of an individual will be assessed at their marginal rate of income tax, based on their total income earned during the tax year (calendar year). The relevant income tax rates and bands are set out below:

The above rates are charged before the allocation of tax credits and reliefs, the main tax credits of which are set out below:

 The Universal Social Charge (USC) is another form of income tax and is payable on gross income after relief for certain trading losses and capital allowances but before relief for pension contributions. 
The relevant USC rates and bands are as follows:

Pay Related Social Insurance (PRSI) is also payable at a rate of 4% on unearned rental income. As from 1 October 2024, the PRSI rate will increase to 4.1%.

Non-resident individuals
Non-resident individuals with unearned passive income only e.g., rental income is exempt from PRSI but are still liable to Income tax and the USC. 

European Union (EU) citizens or nationals
If at least 75% of an individual’s worldwide income is taxable in Ireland, they receive a full tax credit on a cumulative basis.
If less than 75% of an individual’s worldwide income is taxable in Ireland, they may receive a portion of tax credits.

Citizen of a country that has a tax treaty with Ireland
If an individual’s only source of income is Irish, they receive full tax credits on a cumulative basis.  If an individual also has a non-Irish source of income, they may receive a portion of tax credits.

Other non-residents
All other non-residents receive no tax credits.  

Resident Companies
Irish resident companies in receipt of rental income are subject to corporation tax on the profits (rental income less allowable expenses) arising from their worldwide property business. 

Non-Irish resident companies deriving rental income from Irish real estate are generally subject to corporation tax on the profits (rental income less allowable expenses) arising from their Irish property business. This treatment is a change from previous treatment up to January 2022. Please see further details below.

Where rents are paid to a non-resident landlord, the tenant is obliged to deduct 20% withholding tax from the payment, unless the landlord appoints an Irish agent to collect the rents on his/her behalf. As noted above, from 1 July 2023 there is a new NRWT system. This withholding tax may be offset against their Irish income tax liability.

Liability to tax 
Rental income is subject to corporation tax as passive income.

Basis to tax
Passive income (e.g., rental income) is taxed at the higher rate of corporation tax of 25%.  The income is declared as part of the company’s annual corporation tax return.  Where the company is regarded as a ‘Close Company’– an Irish Resident company which is controlled by five or fewer individuals – the income may be subject to an additional Close Company Surcharge.  The surcharge is levied on 20% of the undistributed after-tax rental income of the company, giving an effective rate of tax of 40%.

Non-Resident Companies
A non-resident company which has a branch or agency in Ireland is subject to the same rules as resident companies in relation to the income earned by the specific branch or agency in the state. 

Up to 31 December 2021, a non-resident company which did not have a branch or agency in Ireland was subject to income tax on any income derived from sources in Ireland, including rental income. Income tax was charged at the standard rate of tax (currently 20%). 

With effect from 1 January 2022, a non-resident company that receives rents from Irish property assets are within the charge to Irish corporation tax.  Accordingly, rental profits arising to a non-resident company are subject to corporation tax at the higher rate of 25%.  

Capital gains

Individuals
Individuals are subject to Capital Gains Tax (CGT) at a rate of 33% on gains made on disposals of Irish real estate properties. There are several reliefs and exemptions from CGT that may be available depending on the relevant circumstances.

Withholding tax
Where the market value of an Irish real estate being sold exceeds €500,000 in the case of a commercial real estate or €1m for residential real estate, the purchaser is obliged to withhold 15% of the sale consideration, unless a CG50 pre-clearance is applied for by the vendor to the Irish Revenue authorities.

An Irish resident taxpayer making a disposal is entitled to such a clearance certificate as a right, provided he/she applies for it in time. A non-resident person will receive such a certificate only where they have satisfied Revenue that no CGT liability arises on the sale or satisfies them to the amount of the liability and that the tax will be paid.

Companies
Capital gains realised by companies are subject to corporation tax on chargeable gains.  Chargeable gains refer to the increase in market value on chargeable assets from the date they are first acquired to the date when they are sold or disposed.  Chargeable assets generally refer to Capital Assets, which includes real estate and company shares. 

Liability to tax
Companies pay corporation tax on business profits (excluding passive income) at a rate of 12.5%.  The current capital gains tax rate is 33% on chargeable gains.  Companies will calculate the gain in the same manner as individuals and pay capital gains tax at the rate of 33%.

Exemptions
Irish tax legislation provides for special treatment in respect of transactions between related companies. To qualify for the relief, a company must be a 75% effective subsidiary of the other. The legislation provides that only companies resident in the EU or an EEA country with which Ireland has concluded a double tax agreement can make use of the relief. The relief includes the purchase or transfer of Irish real estate. As part of the relief qualifying purchases or transfers between such connected companies are treated on a no gain, no loss basis, until the property is sold/transferred outside of the group.

Non-Resident Companies
Non-resident companies are subject to capital gains tax on chargeable gains made on the disposals of specified Irish Assets.

Liability to tax
Specified Irish Assets include the following:

- Land and buildings situated in Ireland.
- Unquoted shares in a company deriving the greater part of their value from Irish land or buildings.
- Capital assets used for the purpose of a trade carried on in Ireland.
 

Where a non-resident company disposes of specified Irish assets it will be subject to 33% capital gains tax on any gain on the disposal.

Irish VAT
 

Value-Added Tax

Individuals
VAT is a broad-based consumption tax levied on the supply of goods and services in Ireland.  VAT is applicable to the value of the supply, not merely the profit element derived from that supply. In principle, all commercial activities involving the production and distribution of goods and the provision of services that are bought and sold for use or consumption fall within the scope of VAT.  Unless VAT legislation specifically exempts a supply from VAT, the supply of goods or services is 'taxable'. 

Liability to tax
In Ireland the primary rates of VAT and/or VAT treatments that apply are:

• Standard rate of VAT: currently 23%. 
• Reduced rate of VAT: currently 13.5%. 
• Zero–rate of VAT: Goods and services that fall within this category are ‘taxable’ but are liable to VAT at a rate of 0%.  This means that the supplier is not required to charge VAT on the goods/services supplied, but because these supplies are 'taxable', the business is able to recover any VAT (input VAT) incurred on costs associated with making them. 
• Exempt from VAT: no VAT is charged on exempt goods and services but, subject to a de minimis rule, no input VAT can be reclaimed on the costs associated with making such exempt supplies. 
• Outside the scope of Irish VAT: essentially anything not included within the other four categories.  As an example, the transfer or sale of a real estate letting business, or inclusion of real estate in the ‘transfer of a business’, may, subject to certain conditions, be treated as outside the scope of VAT.

Resident individuals carrying on business in Ireland whose annual turnover does not exceed €75,000 for goods and €37,500 for services are not obliged to register for Irish VAT but may elect to register if they wish. The relevant thresholds do not apply to foreign traders and generally where a foreign trader engages in any supplies of goods or services in the state, then they are required to VAT register.

Basis of tax
For real estate transactions, post 1 July 2008, the supply of freehold ‘new’ real estate is subject to VAT at 13.5%.  The sale of ‘old’ real estate is exempt from VAT, unless the vendor and purchaser exercise a joint option to tax.  Where real estate on which a VAT claim had been previously made by the vendor is sold as an exempt sale, then the vendor can be liable to a clawback on a portion of the VAT claimed and will be required to repay this to the tax authorities on completion of the sale.

The option to jointly elect to tax the supply can be favourable where the vendor wishes to avoid this clawback and the buyer is VAT registered and is entitled to a full reclaim of the VAT charged on the sale.

‘New’ properties include:
- the first supply of a completed real estate within 5 years of completion
- the second and subsequent supply of a new real estate within 5 years of completion, unless it has been occupied for at least 2 years
- old real estate which has been significantly re-developed i.e. made ‘new’ again.

Generally, lease interests in real estate are exempt from VAT (with a landlord’s ‘option to tax’ in place, the rents in certain circumstances are subject to VAT at the 23% standard rate).

Irish VAT on real estate rules are complex and specific advice should be sought in respect of all real estate related supplies.

Companies
The same rules as for individuals apply.

Transfer Taxes

Individuals
Stamp Duty is payable on transfers of land, buildings and other assets which cannot be passed by delivery. It is chargeable on instruments (a written document) of transfer executed in Ireland and on instruments, wherever executed, which relate to Irish real estate 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 real estate transferring.

Basis of tax
The transfer or purchase of residential real estate is subject to the following rates of stamp duty:

A new stamp duty rate of 10% was introduced from 20th May 2021 on cumulative purchases of 10 or more residential units (houses) in a 12-month period.  However, the 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.

Commercial real estate including land and buildings are subject to a stamp duty rate of 7.5%.

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.

Exemptions
There are various exemptions available in case of (de)merger, takeover or internal reorganisations. However, various detailed conditions apply.

Residential Development (Stamp Duty) Refund Scheme 

This scheme provides for the refunding of a portion of the Stamp Duty paid on the acquisition of non-residential land where that land is subsequently developed for residential purposes, so bringing the effective Stamp Duty rate down to a minimum of 2%.  This is of course subject to a number of conditions, including ones relating to the portion of the land involved given over to housing and the time taken to commence and complete the construction of the residential units involved. The scheme is not open-ended. Construction operations must commence on or before 31 December 2025 and a 30-month time limit is allowed for completion, effectively extending the scheme to 30 June 2028.

Companies
The same rules as for individuals apply.

Exemptions
There are reliefs available for companies that transfer real estate to members of the same qualifying group.

Irish stamp duty legislation provides for special treatment in respect of transactions between certain related companies. To qualify for the relief, the companies must be 90% associated. The legislation does not impose any conditions as to the tax residence or place of incorporation of companies claiming relief. The relief includes the purchase or transfer of Irish real estate. As part of the relief qualifying purchases or transfers will be exempt to stamp duty.

Irish Local taxes

Individuals
Local Property Tax (LPT) is payable in respect of owners of Irish residential real estate, regardless of where the owner lives. For LPT purposes, residential real estate means any building or structure which is used as, or is suitable for use, as a dwelling.

Liability to tax
LPT will arise on the market value of a residential real estate on the updated ‘valuation date’ i.e., 1st November 2022.

Basis of tax
There is a system of 19 market value bands of €50,000 up to €1.75 million. The LPT charge is fixed at the current charge for Bands 1 & 2 (€90 and €225 respectively). For properties in bands 3-19, a mid-point rate of 0.1029% is charged. For properties valued at between €1m and €1.75m (bands 12-19), a mid-point rate of 0.1029% is charged on the first €1.05m and 0.25% on the balance over €1.05m. For properties worth over €1.75m, they will be charged as per properties in bands 12-19 as outlined above on the first €1.75m of their value, with a higher rate of 0.3% on the property’s value in excess of €1.75m.

Local authorities can vary the LPT base rate on residential properties. The local authority can increase or decrease the LPT rate by up to 15% from the base rate. This is known as the Local Adjustment Factor (LAF).

Vacant Homes Tax (VHT)
Vacant Homes Tax is charged at a rate of 3 times the basic rate of LPT applying to the residential property for the year in which the chargeable period ends. VHT may be chargeable where a dwelling is used for less than 30 days in the 12-month period. The legislation provides that certain properties will not fall within the scope of the tax. The legislation also provides exemptions from the charge to VHT for properties that are vacant as a result of genuine and acceptable reasons. Each chargeable period commences on 1 November and ends on 31 October of the following year. The first chargeable period commenced on 1 November 2022 and ends on 31 October 2023.

Residential Zoned Land Tax (RZLT)
Residential Zoned Land Tax is charged at a rate of 3% on the market value of land and is deemed in scope from 1 February 2025 onwards. Therefore, RZLT will open in early December 2024. The obligation to register for RZLT will arise in respect of a relevant site which is land that will appear on a revised final RZLT map. This will be published by local authorities not later than 31 January each year, commencing in 2024. Such land may include residential properties and, where such properties are subject to LPT, they will not be subject to RZLT. Where the gardens or yards of such properties are greater than 0.4047 hectares, owners will be obliged to register, but not pay, RZLT.

Companies
The same rules as for individuals apply.

Irish Net Wealth/worth taxes
 

Individuals
A domicile levy of up to €200,000 applies to individuals who are Irish domiciled irrespective of their tax residence position and whether they are Irish citizens. This applies in very limited circumstances, and only to high net worth individuals, in order to ensure a minimum amount of income tax of €200,000 is paid in Ireland. 

Liability to tax
Liability to the levy depends on the level of worldwide income (relevant if more than €1 million) and the market value of Irish-located real estate (relevant if in excess of €5 million).

Basis of tax
The domicile levy must be paid on a self-assessment basis and any Irish income tax paid will be allowed as a credit against the levy.

Vehicles for Irish real estate

Commonly used vehicles for Irish real estate
Sole trader
The business of a sole trader is not distinguished from the proprietor’s personal affairs so that if there are any debts, you are legally liable to pay those debts personally. Profits/rental income is subject to income tax, USC and PRSI as personal income.

Company
A company is a separate legal entity from its owners. This is a frequently used vehicle for the ownership of real estate. The equity is divided into shares and the shareholders are not personally liable for the business debt. Trading profits are generally taxed at 12.5%. Passive/rental income is taxed at a rate of 25%, and if a ‘Close Company’ (an Irish Resident company which is controlled by five or fewer individuals), an additional 20% surcharge levied on undistributed after-tax rental income.

Partnership
Investments in real estate are often done on a collective basis by some of the entities and/or individuals. There is little distinction between the taxation of a sole trader, with a partnership merely being an extension of a sole trader. The profits of the partnership are taxable in the hands of the individual partners in accordance with the Partnership agreement. Each partner is ‘jointly and severally’ liable for the partnership debts. The partners share of profits/rental income is subject to income tax, USC and PRSI as personal income.

Joint Ventures
A joint venture can be in the form of a company or partnership and the tax treatment will follow the same principles as its underlying structure. It is normally a cooperative enterprise entered into by two or more for the purpose of a specific project or other business activity. The reason for a joint venture is usually some specific project.

Trusts
A trust is an equitable obligation, binding on a person (the trustee who holds the legal interest) to deal with the real estate (the trust real estate) for the benefit of persons (called beneficiaries who holds the equitable interest). The tax treatment of trusts can be complex depending on the type of trust involved.

Specific real estate vehicles for Irish real estate

Real estate investment trusts (REIT)
The REIT is the internationally recognised collective investment structure for holding commercial and/or residential property. The REIT typically takes the form of a listed company (or group).

The normal stamp duty rates (as set out above) applies to Irish property transfers into a REIT. A REIT itself is exempt from tax on rental income and on any capital gains arising on property disposals (except in instances where the development cost represents more than 30% of the market value of the asset and the property is disposed of within 3 years of the development). A REIT or group REIT will be charged to CT under Case IV of Schedule D if it makes a distribution of less than 85% of its annual property income.

Distributions out of the REIT to shareholders are liable to dividend withholding tax at the rate of 25% subject to a number of exceptions:

- Irish resident shareholders are liable to tax on REIT distributions at their marginal rates with credit being allowed for the 25% withholding tax rate, while Irish corporates will generally be taxed at the passive income rate of 25%. Capital gains (e.g. on the disposal of REIT shares) will be taxable at the normal CGT rate (currently 33%).
- Shareholders who are tax resident in countries that have a double taxation agreement with Ireland can benefit from a lower dividend withholding tax rate if that is provided for under the agreement.
- Distributions from a company in a group REIT to another company in the same group REIT are exempt from corporation tax.

For non-resident shareholders, Capital gains generated by the REIT do not have to be distributed to shareholders and, if retained and reinvested by the REIT, will be reflected in its share price. The non­resident investor can then dispose of the REIT shares free of Irish CGT.  This would not be available if the non-resident investor held the real estate directly. The disposal of the REIT shares would, however, be liable to stamp duty (at the rate of 1%) in the hands of the purchaser.

Irish Real Estate Fund (IREF)
2016 legislation changes introduced a new type of fund, an Irish Real Estate Fund (IREF). An IREF can include Qualifying lnvestor Alternative lnvestment Funds (QIAIF), Irish Collective Asset-management Vehicles (ICAV) or Irish Real Estate lnvestment Trusts (REIT).

A fund will be considered an IREF where 25% or more of the market value of its assets are derived from Irish land or buildings. Where a fund is categorised as an IREF, 25% withholding tax must be operated by the fund on distributions of income. Shareholders, who are resident in a country that have a Double Taxation Agreement (DTA) with lreland, can benefit from a lower dividend withholding tax rate, if that is provided for under the DTA. Although rates vary, these would typically be less than 25% and this would represent the final Irish tax liability of the foreign shareholder.

Certain categories of investors should be exempt from the withholding tax, including Irish pension funds, Irish regulated funds, life assurance companies and their EEA counterparts subject to equivalent supervision and regulation, Irish charities, Irish credit unions and approved retirement funds. Where the investor is an exempt investor it should be possible to obtain advance clearance from Revenue in order for the distribution/redemption to be made gross of IREF withholding tax.