Insights

Incentives to investing in Irish Property

Investing in Irish property from abroad has become more and more attractive to foreign investors.  Allied to the reduction in prices in both the residential and commercial market there are substantial tax incentives in the current market introduced in the 2012 Budget.  In particular:-

 1. the current rate of stamp duty on commercial property which has dropped significantly from an upper limit of 6% to a single rate of 2%, and
 
2. a new incentive relief from CGT has been introduced for the first seven years of ownership for properties purchased before the end of 2013, where the property is held for more than seven years. 

 The relief will apply to all property, whether residential or commercial held for 7 years post-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.

We summarise below the main tax issues to be considered for non-residents on the acquisition and holding of Irish property:-

ACQUISITION

1. Stamp Duty

  • Commercial property - single rate of 2%
  • Residential Property - property value up to €1,000,000 - 1%
  • Balance - 2%
  • An attractive option is to acquire shares in a company holding the property - stamp duty on the transfer of Irish shares is charged at 1% of their value.  We outline the tax advantages to corporate investment further below.

2. Value Added Tax

  • In the case of a freehold or “freehold equivalent” interest in property VAT applies at the rate of 13.5% if the property is considered “new” (less than 5 years old) or if the seller and purchaser agree that VAT should apply.

HOLDING IRISH PROPERTY

1. Rent

  • Irish resident company - corporation tax at 25% of rental profits.
  • Non-resident companies and individuals - standard rate of income tax - 20% (higher rate for individuals of 41% in excess of the standard rate band).
  • In computing rental income for tax purposes, deductions are allowed for payments to a superior landlord, maintenance, repairs, insurance, management fees, improvements and interest on borrowings incurred in the purchase, improvement or repair of the property.

2. Withholding Tax

  • Withholding tax does apply where rent is payable to a non-resident landlord.  However, there are options available to foreign investors to apply to Revenue for a certificate of exemption and it is open to foreign investors to appoint a resident Irish agent on their behalf.  The agent becomes accountable and liable for discharging the tax.

3. Interest

  • Interest payable in respect of borrowings secured upon Irish real property may be regarded as Irish source interest, and accordingly separately subject to withholding tax, but there are exemptions in circumstances where the lender is an Irish bank or if the borrower is a company exempted by the Revenue Commissioners.

4. VAT on leases

  •  A landlord can elect to apply VAT at the standard rate (23%).  This is usually applied where the landlord has incurred VAT on the purchase of the property in Ireland.

IRELAND’S MAIN TAX ADVANTAGES FOR HOLDING COMPANIES

  • Capital gains tax participation exemption on disposal of qualifying shareholdings;
  • Effective exemption for foreign dividends via 12.5% tax rate for qualifying foreign dividends and a flexible foreign tax credit system;
  • Double tax relief available for tax suffered on foreign branch profits and pooling provisions for unused credits;
  • No withholding tax on dividends paid to treaty countries (or intermediate non-treaty subsidiaries); Exemptions to dividend withholding tax are available under the Parent Subsidiary Directive for EU companies;
  • Access to double taxation agreements to minimise withholding tax on inbound royalties and interest, and additional domestic provisions to minimise withholding tax on outbound payments;
  • Extensive double taxation agreement network and access to EU directives.

If you have any queries relating to the above, or to dealing with Irish property in general, please contact Tom Marren, Roisin, Bennett, Brendan Sharkey or Peter Kearney.


Keywords: Property, Peter Kearney, Publication, Investment in Ireland

< Back to Insights