The 6% rate is applicable to sales or 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 preference to acquire the shares in the property holding entity. Such a purchase will involve analysis of additional factors such as the tax and liability profile of the property company. The Department of Finance has launched a consultation on stamp duty reform. If stamp duty rates on share sales reduce, this may further impact the structure of property transactions. The availability of stamp duty reliefs, such as exemptions for reconstructions and reorganisations, is also likely to be reviewed by purchasers or sellers.
Although the 6% rate is a significant increase, it remains lower than the 9% rate which applied prior to 2009. The increase is the most significant revenue raising measure announced in Budget 2018. The increase means Ireland's stamp duty rate now exceeds the UK's 5% rate.
The stamp duty changes are one of a number of changes to property taxation announced. The existing vacant site levy will increase from 3% to 7% if the vacancy persists. In practical terms any owner of a site on the vacant site register who does not develop their land in 2018 will pay the 3% levy in 2019 and then become liable to the increased rate of 7% from 1 January 2019.
In a measure which Maples have long called for, the Minister announced an amendment to the 2011 "CGT holiday" for land and buildings. This provided a capital gains tax exemption to disposals of land which was acquired between 2011 and 2015, provided the land was held for seven years. The seven year holding period will be reduced to four years, which suggests that land acquired in 2012 can be sold free of capital gains tax during 2017. This should free up development land and invigorate the commercial property market.