Tax incentives to investing in Irish property
By Joe McCall, Byrne & McCall
In a bid to stimulate transactions in the Irish property market, the Irish Government has introduced a measure that may be of interest to investors who see value in the Irish real estate market.
Tax-free sale of EEA property
The Finance Act 2012 introduced a new incentive relief from capital gains tax (CGT) for disposals of certain properties. The exemption from CGT applies to properties bought after 7 December 2011 and before 31 December 2014. Where such property is held for a period of more than seven years, the gains attributed to that seven-year period will be free from CGT. The CGT relief applies to individuals and companies.
The incentive applies to “land or buildings”, which means residential and commercial property, and applies to all such property located in the European Economic Area (EEA), including Ireland. Given that the EEA comprises 30 jurisdictions (27 EU Member States as well as Iceland, Liechtenstein and Norway), the potential of the exemption for Irish tax purposes is quite obvious.
Where the property is held for a period in excess of seven years, the relief from CGT is calculated on the basis of the proportion that seven years bears to the total period of ownership. For example, where a property is to be held for nine years, 7/9 of the gain will be exempt from CGT.
In order for the relief to apply, the property must be acquired for a consideration equal to the market value of the property (or if acquired from a relative, not less than 75% of the market value on the date acquired). It should be noted that the new legislation underpinning the relief contains anti-avoidance measures and provisions designed to guard against artificial arrangements.
In the context of the above exemption, it is worth mentioning that the rate of stamp duty (which is essentially a tax on the documentation involved in transferring property) on non-residential Irish property was reduced by the 2012 Budget. For commercial property, the rate of duty has fallen from 6% to 2% for transactions after 7 December 2011.
An appealing option is to acquire shares in a company holding the property as stamp duty on the transfer of shares is charged at 1% of their value.
Joe McCall, Managing Partner
Byrne & McCall Accountants & Tax Advisors, Dublin, Ireland
T: +353 1 612 05 80
Byrne & McCall was established in Dublin in 1989 and since they have been providing business and taxation advice to both domestic and international clients.
Joe McCall is Managing Partner of Byrne & McCall. He is Certified Public Accountant. His areas of expertise include Tax & Business Advice for companies wishing to set up a business in Ireland and Taxation of Cross Border Transactions.
published: June 2014