Capital Gains Tax
The taxation issues on the acquisition, sale and leasing of property are broadly similar in Ireland and the United Kingdom. Although the systems of tax applicable are similar, the tax rates differ.The system of capital gains tax in Ireland is almost identical to that in the United Kingdom. The general rate is 33%. Companies pay capital gains tax as part of their corporation tax liability, where they are resident in Ireland. Non-resident entities pay Irish capital gains tax on real property assets situated within Ireland.
Stamp duty is payable on the purchase of real property. The principles are very similar to those for stamp duty land tax in the United Kingdom. The rates have varied considerably over time. The current rate of stamp duty on the non-residential property was increased from 2% to 6% in October 2017.
Stamp duty on leases is paid at a flat rate of 1% of the rent where the lease is under 25 years, which is almost invariably the case with commercial leases. Unlike stamp duty land tax, there is no stamp duty based on the capital value of the rent. If there is a premium payable either on the initial grant or on assignment from one tenant to another, stamp duty applies to the premium.
Interest to service monies borrowed to acquire property, is usually deductible in the calculation of corporation tax and income tax. Rent and service charges et cetera are usually deductible against trading profits in the calculation of corporation tax and income tax case of individuals
Capital Allowances are not generally available for commercial premises. They are available for industrial buildings (25 years at 4%) and certain other classes of premises.
From time to time incentives have been made available by way of capital allowances. In some cases, there are accelerated allowances claimed over a shorter period such as 7 to 10 years or other commercial premises such as offices and retail units by way of urban regeneration and similar incentives.
There is a system of rates charged by local authorities on a business property by way of local taxation. It is payable, annually usually in two instalments at a rate struck by the council in that year.
The charge is based on the valuation of the premises in a somewhat complex manner, broadly related to the relative values of other premises in the council area.
The broad principles of VAT, being an EU-based tax, apply to Irish commercial property. In the case of a new property or property within its first 20 years after construction redevelopment or significant alteration, VAT liability of 13.5% may arise. There is a capital goods scheme by which the development costs are effectively amortised from a VAT recovery perspective over 20 years in most cases and 10 years in the case of some redevelopment works.
VAT is not generally an issue for commercial businesses provided that the property is used for a business which is itself subject to value-added tax on all of its turnover. This sometimes raises issues for VAT exempt businesses which may be obliged to pay and cannot recover VAT. Sometimes steps can be taken to mitigate liability.