A proposed change to the Finance Bill 2017 has been announced, intended to stop persons from avoiding the new higher 6% stamp duty rate on non-residential property. This change will apply to those acquiring commercial property who are making the transfer by way of company shares or similar type sales.
Previously a 1% stamp duty rate applied to the sale of shares in a property holding company. The new measure, Section 31C of the Stamp Duties Consolidation Act, is designed to stop persons setting up artificial transactions involving the placing of commercial property assets into companies, with the intention of achieving the sale of property via a sale of shares. The Section 31C provisions will also apply to property held in a range of vehicles including, partnership interests and certain Irish property funds.
The change applies from Wednesday, 6 December 2017, on the assumption that the Dáil approves the Government’s recommendation for the change. Finance Bill 2017 is expected to be signed into law no later than 31 December 2017.
While the proposed change will apply on any instruments executed on or after 6 December 2017, the measures include transitional provisions whereby the higher rate of stamp duty will not apply where a binding contract was executed before 6 December 2017, provided the transaction completes before 1 March 2018.
This new measures are designed to align the stamp duty treatment whether the commercial property is sold directly, or via a transfer indirectly through a company, fund or partnership interest.
The measures will not apply to residential property sold indirectly through a company, when a company's value does not wholly or mainly derive from commercial property (e.g. certain trading companies), or to sales of company shares where the control of that company does not pass to the acquirer.