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VAT treatment of transactions on the property. As a general
rule the first sale of a freehold or long leasehold interest in
commercial property developed within the previous 5 years is
likely to be subject to VAT at the current rate of 13.5%.
• The sale of a freehold or long leasehold interest in older
commercial property is in the main exempt from VAT
but a capital goods scheme applies to such properties.
Essentially this confers a VAT life on the property known
as an adjustment period of 20 years on a property from
the date of its development or acquisition and sales within
that adjustment period may give rise to a proportionate
clawback for the owner on VAT reclaimed on acquisition
or development. Where this is the case a sale may be the
subject of a joint option to tax by seller and buyer. There
are transfer of business relief rules in ROI (similar to the
transfer of a going concern relief in the UK) by which even if a
property has been the subject of an option to tax it is possible
to treat its sale as falling outside the scope of VAT if it is let
to tenants provided the buyer continues that letting business,
also opts to tax and notifies the Revenue Commissioners of
such option. In general leases are exempt supplies but subject
to a landlord electing to opt to tax them (which a landlord
is able to do on a lease by lease basis) and VAT on rents is
chargeable at the current rate of 23%.
• The sale of residential property by a developer/builder is
generally always subject to VAT but otherwise the sale and
purchase of residential property will not attract VAT.
Acquisition of shares in a company holding a property
• Stamp Duty at 1% applies to the acquisition of shares in an
Irish incorporated company owning a property as opposed
to a purchase of the property itself. The rate of duty on the
transfer of shares in an Irish incorporated company is also 1%.
• An exemption from stamp duty is available to, for example,
transfer of units in a Regulated Investment Fund (QIF) that
own Irish real estate and interests in an Irish REIT.
• VAT is not payable on a share purchase.
Holding investment property
• Property rental business profits from Irish land are subject
to corporation tax or income tax at rates that depend on the
nature of the property owner: 25% corporation tax for Irish
resident companies; 20% income tax for non-Irish resident
companies; and up to 55% income tax for individuals.
• An exemption from such tax is available to, for example, Irish
approved charities, pension funds, QIFs and Irish REITs.
• Profits are calculated broadly by reference to accounts
prepared on generally accepted accounting principles but with
some detailed modifications.
• There is no formal thin capitalisation rules, so for commercial
property, 100% debt financing is possible.
• Capital allowances (tax depreciation) are available to set
off against such profits in respect of capital expenditure on
certain assets that are used in the property rental business,
particularly plant and machinery at rates of 15% per year on a
straight line basis, with 10% in the final year.
• A non resident landlord may suffer a 20% withholding tax
on rental payments unless an Irish rent collection agent is
appointed.
• Distributions and redemptions from a REIT suffer a 20%
withholding tax.
• Distributions and redemptions from a QIF to a non Irish
resident do not suffer a withholding tax where a qualifying
non resident declaration is submitted.
• Distributions and redemptions from a QIF to an Irish resident
suffer tax at a rate of 25% for corporations and 41% for
individuals.
Disposals
• Gains on disposals of properties held as investments attract
corporation tax for Irish resident companies at an effective
rate of 33% and capital gains tax (CGT) at the rate of 33%
for Irish resident individuals. Non residents are liable to CGT
on gains realised from the sale of Irish real estate or, from the
sale of unquoted shares of a company, whose greater value
derives from Irish real estate, at the same CGT rates as Irish
residents.
• An exemption from such tax is available to, for example, Irish
approved charities, pension funds, QIF’s and Irish REIT’s
• Income profits on sales of properties acquired and held as
trading stock or developed and sold in the course of a trade
attract corporation tax at 12.5% for Irish resident companies
and non-Irish resident companies that trade in Ireland through
a permanent establishment and up to 55% income tax for
individuals.
• Gains of a capital nature made by persons that acquire (or
develop) land with the sole or main purpose of realising a gain
from disposing of the land or anything deriving its value from
the land (when developed) may be subject to Irish income
tax if their activity is not subject to Irish tax on trading profits,
though non-residents may be able to obtain relief from such
tax under any applicable double tax treaty with Ireland.
Temporary exemption
• Property purchased in Ireland or in the EU before December
31, 2014 and held as investments for at least 7 years, by a
company or an individual will be eligible for an exemption
from CGT or corporation tax on chargeable gains, on a
proportion of the gain. 100% exemption applies if the disposal
occurs at the end of year 7 otherwise the exempt part of the
gain is calculated by multiplying the gain by the factor 7/n,
where “n” equals the number of complete years of ownership.
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Investors Guide to Europe 2015