Property Tax Guide

There are various taxation charges that arise in a typical conveyancing transaction, which affect purchasers, sellers and owners of residential or commercial property. All parties to a transaction should carefully consider the taxation costs that may arise before committing to a purchase or sale of property.

Stamp Duty

Stamp Duty is paid by a purchaser on the conveyance documents that transfer ownership of a property. Stamp Duty applies to both residential and commercial property. The amount of stamp duty depends on the price paid (or market value where the price paid is less than market value) for the property


Residential Property

The most common charge to stamp duty that affects individuals is the stamp duty on the purchase of houses and apartments. The current rates of duty applicable are 1% on the value of the property up to €1,000,000.00 and 2% of the value of the property in excess of €1,000,000.00


Commercial Property

Commercial property includes but is not limited to; sites, offices, factories, shops, other business premises and public houses.

The current rate of stamp duty applicable to a transfer of commercial property is 7.5%


Site Purchase With Agreement To Build

Where an individual purchasers a site as part of an arrangement or agreement to construct a house or apartment on that site then stamp duty will be charged at 1% of the aggregate site and building costs.


Leases

A lease is chargeable to stamp duty on both the premium (cost for the grant of the lease) and the rent payable under the lease.

The rate chargeable on the premium is similar to the rate for transfers of residential or commercial property, either 1% or 2%, depending on the nature of the transaction.

The rate chargeable on the rent is as follows:

I.Lease for a term not exceeding 35 years or for any indefinite term is 1% of the average annual rent.
II.Lease for a term exceeding 35 years but not exceeding 100 years is 6% of the average annual rent.
II.Lease for a term exceeding 100 years is 12% of the average annual rent.
IV.A lease for a house or apartment for a term not exceeding 35 years or for any indefinite term and where the rent does not exceed €30,000 per annum is exempt from stamp duty.

 

Exemptions From Stamp Duty

The following transactions are exempt from stamp duty:-

I. All transfers and/or leases of property between spouses and civil partners (unless the transfer is a subsale – a sale carried out within the framework of a larger sale)
II. Property transferred between former spouses/civil partners under a court order following a divorce or dissolution of a civil partnership.
III. Property transferred by a cohabitant to his or her cohabitant on or after the 1st January 2011 under a Property Adjustment Order.

 

Capital Gains Tax

Capital Gains Tax is a tax charged on the capital gain (profit) made on the disposal of an asset by a chargeable person to include land, buildings and company shares on or after the 6th April 1974. As it is a tax on disposals gifts also come within this scope including voluntary transfers. The vendor should consult with the Revenue to ascertain the current rate of tax.

The following are a list of exemptions from Capital Gains Tax:

  • Gains on the disposal of property owned by you (house or apartment) which was occupied by you or by a dependent relative as a sole or main residence. Restrictions may apply where the property was not fully occupied as a main residence throughout the period of ownership or where the sale price reflects development value.
  • Gains from betting, lotteries, sweepstakes, bonuses payable under the National Instalments Savings Scheme and Prize Bond winnings.
  • Gains on Government Loans and Debenture issued by certain Semi-state bodies.
  • Gains on disposal of wasting chattels that is movable goods, for example, animals and private motor cars.
  • Gains on life assurance policies (unless purchased from another person or taken out with certain foreign insurers on or after 20 May 1993).
  • Gains made by individuals on tangible moveable property worth €2,540 or less at the time of disposal.
  • In Budget 2012, a new incentive relief from CGT was introduced for the first 7 years of ownership for properties bought between 7 December 2011 and the end of 2013 (extended to the end of 2014 in Budget 2014), where the property is held for more than 7 years. The relief applies to all property, whether residential or non-residential. The relief does not apply if a property is sold within 7 years of its acquisition. If it is sold more than 7 years after acquisition and a gain is made on the sale, relief will be given for the initial 7-year holding period. For example, if the property was bought in January 2012 and sold in January 2022, the property would have been held for 10 years, so 7/10 of any gain will be relieved from CGT and 3/10 is taxable. This relief applies to land or buildings in the State and to land or buildings situated in any EEA state.

 

Who is a chargeable person?

A chargeable person is any person who is resident or ordinarily resident and domiciled in the State for a year of assessment. This person is liable to tax or chargeable to tax on chargeable gains accruing and all disposables of chargeable assets made during that year. Everyone is liable to Capital Gains tax on the disposal of Irish Land.


What is the disposal of assets for the purpose of Capital Gains Tax?

A disposal of an asset includes:-

  • A transfer by sale, exchange or gift.
  • The settlement of an asset on Trustees.

Disposals that are not made at arm’s length, for example gifts, are deemed to have been made at the market value of the asset at the date of disposal.


Annual Exemption

There is an annual exemption per individual which is not transferable between spouses. Vendors should consult with the Revenue to ascertain the current value of the exemption.


How do I calculate a gain?

The Capital Gain is the difference between:-

  • The consideration for the disposal of the assets (or the market value of the assets at the date of disposal, if it is a gift) and
  • The cost of acquiring the asset, or its market value if acquired by way of a gift, and any expenditure incurred on its improvement. This figure may be adjusted to account for inflation. Incidental costs of making the disposal may also be deducted.

What are incidental costs?

Incidental costs are allowable deductions when calculating the gain on the disposal of an asset and can include the cost of acquiring the asset, for example surveyors, stamp duty and legal fees; the cost of improvement works completed on the property; and the costs connected with the disposal of the asset, for example legal fees, advertising etc.


Non-Principal Private Residence Charge (NPPR)

The NPPR tax was an annual charge applied from 2009 to 2013 in respect of residential property that was not the owner’s only or main residence during those years. Therefore, if you owned residential property on the liability date in any of years 2009 to 2013, and it was not your primary residence on that date, you were liable to pay the charge of €200. The first liability date was 31st July 2009. For each year from 2010 to 2013, the liability date was 31st March. If you were liable to pay the charge but have not done so, penalties are applied which accrue and attach as a charge against the property.

The primary exemption to the charge is that the property qualified as a principal private residence, but other exemptions can be availed of and a vendor should contact his/her solicitor or consult the Local Government (Charges) Act 2009 for the full list of exemptions.

When selling your property the solicitor acting for the purchaser will request a Certificate of Discharge (where tax has been paid by the homeowner) or a Certificate of Exemption. These certificates can be obtained from the designated Local Authority on request. Once a certificate is obtained the owner should forward this document to his/her solicitor as it is required as part of the closing documentation.


Local Property Tax (LPT)

An annual tax (LPT) charged on all residential properties in the State came into effect in 2013.

You are a ‘Liable Person’ if you own a residential property on the liability date. The liability date was 1st May 2013 for the year 2013. For all preceding years the liability date is the 1st November. If you own the property on the 1st November in any given year you will be responsible for paying the tax for the coming year. For example, if you sell your property on the 2nd November 2015, you will be required to pay the annual LPT charge for 2016 also. The tax payment is then apportioned or split with the new purchaser.

The tax is based on the value of your property which is the market value of your property could fetch if sold on the open market. The Revenue is responsible for the collection of the tax and have allocated market value bands. The amount of tax is based on the mid-point of the relevant band. Property owners should consult with LPT on the Revenue’s webpage for correct band values and the various ways an owner can pay the tax or make a return.

When registering your property for the Local Property Tax, the Revenue will furnish you with a property I.D. and a pin number. These two numbers/codes together with your PPS number will gain you access to your specific LPT homepage which the Revenue created for you. Property owners can manage multiple properties from their allocated homepage. When selling their property an owner should click on the ‘Payment History’ icon which will bring up a list of all payments made. Property owners should print this page and forward the printout to their solicitor who will use the payment information as proof that the property is registered for LPT and that the tax has been paid since 2013. When viewing the payment history, it is important that the band value corresponds with the agreed purchase price of the property. If the tax returns are below the relevant band value owners must apply for ‘General Clearance’ from the Revenue by completing a Form LPT5. For queries on completing any documentation or for any general queries in relation to LPT, property owners can contact the LPT Helpline: 1980 200 255.


Household Charge

The Household Charge tax was an interim tax return of €100 for the year 2012. If you owned a residential property in Ireland on 1st January 2012 you were obliged to declare your liability and pay the tax to the Household Charge Bureau.

If your Household Charge payment was still outstanding on 1 July 2013, it was increased to €200 and added to the Local Property Tax (LPT) payable on the property. If you do not pay this additional €200, interest and penalties will apply under the LPT system.

Owners selling their property should obtain the relevant Certificate of Discharge/Receipt and forward same to their solicitor.


Commercial Rates

Commercial rates apply to occupiers or owners of non-residential property such as shops, factories and offices.

The charge for commercial rates is calculated by multiplying the Rateable Valuation of the relevant property (Rateable valuations for all properties are determined by the Commissioner of Valuation and are dependent on a number of factors including trading data and the net annual value of a property) by the Annual Rate on Valuation or multiplier, which is decided by the Local Authorities at their annual budget meetings.

It is extremely important that prospective purchasers or tenants who wish to buy or lease a commercial property check that all charges are paid before entering into a legal agreement with the vendor or landlord.


Value Added Tax

Value Added Tax (VAT) is a tax charged on the sale of goods or services and is included in the price of most products and services that we purchase, including residential and commercial property.


Residential Property

The following rules apply to residential property:

I. If an individual is purchasing a new house from a builder or developer, he or she will be charged VAT at 13.5%
II. If an individual is purchasing or selling an old or existing property or a second hand property, VAT is not payable.
III. If an individual purchases a site for a house from a landowner, VAT will not apply unless there is an agreement with the landowner and builder to develop the site.
IV. If you are a Landlord you cannot charge VAT on rent derived from residential property.
V. If you paid VAT on your house (because you bought it from a developer or builder) you only have to pay stamp duty on the base price of the house – before VAT was added.

 

Commercial Property

The VAT rules applicable to commercial property are more varied than the rules applicable to residential property and should be dealt with on a property by property basis. Depending on the nature of the transaction expert tax advice may be required.

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