SELLING AND TRANSFERRING IRISH REAL ESTATE

DIRECT SALE OF REAL ESTATE

Residential individual

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

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

VAT / transfer tax
For Property transactions, 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.

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

Losses
Losses in any year are set off against chargeable gains arising in the same year. Unused losses may be carried forward indefinitely. Capital losses cannot generally be carried back. Gains on development land may only be offset by losses on development land.

 

Non-resident individual

Capital gains
Non-resident individuals are subject to capital gains tax at 33% on chargeable gains made on the disposals of specified Irish assets.

Liability to tax
Irish land and buildings are regarded as specified Irish assets for capital gains tax purposes. Where a non-resident individual disposes of specified Irish assets they will be subject to 33% capital gains tax on any gain on the disposal.

VAT / transfer tax
The same rules as for resident individuals apply.

Losses
The same rules as for resident individuals apply.

 

Resident company

Capital gains
The current capital gains tax rate is 33% on chargeable gains arising for companies.

Exemptions
The Irish tax legislation provides for special treatment in respect of transactions between certain 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 avail of the relief. The relief includes the purchase or transfer of Irish real estate property. As part of the relief qualifying purchases or transfers between such connected companies are treated on no gain no loss basis.

VAT/transfer tax
For Property transactions, 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.

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

The acquisition of Irish real estate is subject to a transfer tax known as stamp duty. This is chargeable on the purchaser and therefore has been discussed in Section 2 ‘Acquiring Real Estate’ above.

Losses
Losses in any year are set off against chargeable gains arising in the same year. Unused losses may be carried forward indefinitely. Capital losses cannot be carried back. Gains on development land may only be offset by losses on development land.

 

Non-resident company

Capital gains
Non-resident companies are subject to capital gains tax at 33% on chargeable gains made on the disposals of specified Irish assets.

Liability to tax
Irish land and buildings are regarded as specified Irish Assets for capital gains tax purposes. 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.

VAT / transfer tax
The same rules as for resident companies apply.

Losses
The same rules as for resident companies apply.

 

INDIRECT SALE 

Resident individuals

Capital gains
The sale of shares by an individual in a company which holds investment property is subject to Capital Gains Tax (CGT) at a rate of 33%. There are several reliefs and exemptions from CGT that may be available depending on the relevant circumstances.

VAT/transfer tax
The sale of shares is VAT exempt.

The acquisition of Irish real estate is subject to a transfer tax known as stamp duty. This is chargeable on the purchaser and therefore has been discussed in Section 2 ‘Acquiring Real Estate’ above.

Losses
Losses in any year are set off against chargeable gains arising in the same year. Unused losses may be carried forward indefinitely. Capital losses cannot generally be carried back.

Non-resident individual

Capital gains
Non- resident individuals are subject to capital gains tax on chargeable gains made on the disposals of specified Irish assets which include unquoted shares in a company deriving the greater part of their value from Irish land or buildings.

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

VAT/transfer tax
The same rules as for resident individuals apply.

Losses
The same rules as for resident individuals apply.

 

Resident company

Capital gains
Companies pay capital gains tax on the sale of shares in the normal manner. The current capital tax rate is 33% on chargeable gains.

Exemptions
The Irish tax legislation provides for an exemption from tax in the case of certain capital gains from the disposal of holdings in subsidiaries.

Certain conditions must be met before a gain can be exempt.

  • First, the investor company must have a minimum shareholding in the investee company.
    The investor is required to have a minimum holding of at least 5 per cent in the investee company for a continuous period of at least 12 months in the 3 years prior to the disposal.
  • Second, the investee company must carry on a trade, or the business of the investor company, its investee company and their ‘5 per cent’ investee companies, taken as a whole, must consist wholly or mainly of the carrying on of a trade or trades.
  • Finally, at the time of the disposal the investee company must be resident in an EU Member State, a territory with which Ireland has a double tax treaty in force or a territory with which Ireland has signed a double tax treaty which has yet to come into force.

The exemption does not apply to shares which derive the greater part of their value from land in the State and as such the availability of the relief in relation to companies holding Irish real estate will be limited.

VAT/transfer tax
The sale of shares is VAT exempt.

The acquisition of Irish real estate is subject to a transfer tax known as stamp duty. This is chargeable on the purchaser and therefore has been discussed in Section 2 ‘Acquiring Real Estate’ above.

Losses
Losses in any year are set off against chargeable gains arising in the same year. Unused losses may be carried forward indefinitely. Capital losses cannot be carried back.

Non-resident company

Capital gains
Non- resident companies are subject to capital gains tax on chargeable gains made on the disposals of specified Irish Assets which include unquoted shares in a company deriving the greater part of their value from Irish land or buildings.

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.

VAT / transfer tax
The same rules as for resident companies apply.

Losses
The same rules as for resident companies apply.

 

DIRECT TRANSFER INTRA CONCERN (IRISH REAL ESTATE TO IRISH COMPANY)

Capital gains
The current capital gains tax rate is 33% on chargeable gains arising for companies.

Exemptions
The Irish tax legislation provides for special treatment in respect of transactions between certain 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 avail of the relief. The relief includes the purchase or transfer of Irish real estate property. As part of the relief qualifying purchases or transfers between such connected companies are treated on no gain no loss basis.

VAT / transfer tax
For Property transactions, 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.

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

The acquisition of Irish real estate is subject to a transfer tax known as stamp duty. This is chargeable on the purchaser and therefore has been discussed in Section 2 ‘Acquiring Real Estate’ above.

Losses
Losses in any year are set off against chargeable gains arising in the same year. Unused losses may be carried forward indefinitely. Capital losses cannot be carried back. Gains on development land may only be offset by losses on development land.

 

INDIRECT TRANSFER INTRA CONCERN (IRISH REAL ESTATE TO IRISH COMPANY)

Capital gains
Companies pay capital gains tax on the sale of shares in the normal manner. The current capital tax rate is 33% on chargeable gains.

Exemptions
The Irish tax legislation provides for an exemption from tax in the case of certain capital gains from the disposal of holdings in subsidiaries.

Certain conditions must be met before a gain can be exempt.

  • First, the investor company must have a minimum shareholding in the investee company.
    The investor is required to have a minimum holding of at least 5 per cent in the investee company for a continuous period of at least 12 months in the 3 years prior to the disposal.
  • Second, the investee company must carry on a trade, or the business of the investor company, its investee company and their ‘5 per cent’ investee companies, taken as a whole, must consist wholly or mainly of the carrying on of a trade or trades.
  • Finally, at the time of the disposal the investee company must be resident in an EU Member State, a territory with which Ireland has a double tax treaty in force or a territory with which Ireland has signed a double tax treaty which has yet to come into force.

The exemption does not apply to shares which derive the greater part of their value from land in the State and as such the availability of the relief in relation to companies holding Irish real estate will be limited.

VAT/transfer tax
The sale of shares is VAT exempt.

The acquisition of Irish real estate is subject to a transfer tax known as stamp duty. This is chargeable on the purchaser and therefore has been discussed in Section 2 ‘Acquiring Real Estate’ above.

Losses
Losses in any year are set off against chargeable gains arising in the same year. Unused losses may be carried forward indefinitely. Capital losses cannot be carried back.

 

DIRECT TRANSFER INTRA CONCERN (IRISH REAL ESTATE TO FOREIGN COMPANY)

Capital gains
The current capital gains tax rate is 33% on chargeable gains arising for companies.

Exemptions
The Irish tax legislation provides for special treatment in respect of transactions between certain 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 avail of the relief. The relief includes the purchase or transfer of Irish real estate property. As part of the relief qualifying purchases or transfers between such connected companies are treated on no gain no loss basis.

VAT / transfer tax
For Property transactions, 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.

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

The acquisition of Irish real estate is subject to a transfer tax known as stamp duty. This is chargeable on the purchaser and therefore has been discussed in Section 2 ‘Acquiring Real Estate’ above.

Losses
Losses in any year are set off against chargeable gains arising in the same year. Unused losses may be carried forward indefinitely. Capital losses cannot be carried back. Gains on development land may only be offset by losses on development land.

 

INDIRECT TRANSFER INTRA CONCERN (IRISH REAL ESTATE TO FOREIGN COMPANY)

Capital gains
Companies pay capital gains tax on the sale of shares in the normal manner. The current capital tax rate is 33% on chargeable gains.

Exemptions
The Irish tax legislation provides for an exemption from tax in the case of certain capital gains from the disposal of holdings in subsidiaries.

Certain conditions must be met before a gain can be exempt.

  • First, the investor company must have a minimum shareholding in the investee company.
    The investor is required to have a minimum holding of at least 5 per cent in the investee company for a continuous period of at least 12 months in the 3 years prior to the disposal.
  • Second, the investee company must carry on a trade, or the business of the investor company, its investee company and their ‘5 per cent’ investee companies, taken as a whole, must consist wholly or mainly of the carrying on of a trade or trades.
  • Finally, at the time of the disposal the investee company must be resident in an EU Member State, a territory with which Ireland has a double tax treaty in force or a territory with which Ireland has signed a double tax treaty which has yet to come into force.

The exemption does not apply to shares which derive the greater part of their value from land in the State and as such the availability of the relief in relation to companies holding Irish real estate will be limited.

VAT/transfer tax
The sale of shares is VAT exempt.

The acquisition of Irish real estate is subject to a transfer tax known as stamp duty. This is chargeable on the purchaser and therefore has been discussed in Section 2 ‘Acquiring Real Estate’ above.

Losses
Losses in any year are set off against chargeable gains arising in the same year. Unused losses may be carried forward indefinitely. Capital losses cannot be carried back.

This report has been produced in conjunction with Nyenrode Business Universiteit 

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