Budget 2018 - Stamp Duty Increase On Commercial Property Grabs The Headlines

Author:Mr Andrew Quinn, William Fogarty, Diarmuid Mawe and Craig Kenny
Profession:Maples and Calder

The Irish Minister for Finance has announced an increase in the stamp duty rate on Irish commercial property to 6%. This represents a trebling of the existing 2% rate and is expected to raise €376 million over the course of 2018.

The 6% rate is applicable to sales or long leases of commercial property after 10 October 2017. Stamp duty is generally payable by the purchaser, lessee or transferee of the property.

If the legislation conforms to historic practice, the 2% rate will continue to apply to transfers pursuant to binding contracts entered into on or before 10 October 2017. For those currently under contract, or in negotiations to acquire property, the clarification of this point will be material. There is likely to be considerable emphasis on whether there is a binding contract from a legal perspective.

Residential property will generally continue to be subject to 1% stamp duty rates on consideration under €1 million. The Minister's speech indicates that the 6% rate will not apply to residential property consideration over €1 million although this remains to be confirmed.

The sale of development land which is ultimately intended to be used for residential property will be subject to a stamp duty refund scheme. The details of the refund scheme are not yet published. The refund will be subject to certain conditions, including a requirement that developers will commence the relevant development within 30 months of the land purchase. Clearly the intention is to prevent the higher rates from increasing the costs of residential development in light of the ongoing housing shortage. There does not appear to be any change to rates for land purchased with a connected agreement to build a house or apartment, which will continue to be subject to the 1% stamp duty rate.  The rate of stamp duty on a limited number of non-real estate related assets, such as goodwill, are traditionally set by reference to the commercial property rate. It remains to be seen whether these will also increase.

The details of the rate increase and the refund scheme will be contained in the Finance Bill which will be published on 19 October 2017.

Transfers of shares in an Irish company holding commercial property will continue to be subject to stamp duty at 1%. Historically, when there is a differential between stamp duty on direct and indirect property transfers, there has been a commercial...

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