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Stamp Duty Considerations When Acquiring Companies Owning Irish Real Estate

Stamp duty on the acquisition of Irish commercial real estate is generally charged at a rate of 7.5%. Irish stamp duty on the acquisition of shares is generally payable at a rate of 1%. However, in certain circumstances, the transfer of shares deriving the greater part of their value from non-residential Irish property may be subject to the higher 7.5% rate of stamp duty. Purchasers should consider the stamp duty position at an early stage when assessing and budgeting for an acquisition.

When does the 7.5% rate apply?

The 7.5% rate of stamp duty is applied to certain transfers of shares in property owning companies. This rate can also apply to interests in partnerships and units in certain investment undertakings/funds.

At a high level, the 7.5% rate of stamp duty may apply where:

  • there is a transfer of a company which derives its value or the greater part of its value (i.e. >50%) directly or indirectly from Irish commercial property,
  • the transfer results in a change in the controlling interest of the property, and
  • a) it would be reasonable to consider that the property was acquired or developed by the company with the main aim of realising a gain from its disposal or b) the property was held as trading stock by the company.

This is an objective test for the purchaser who is the accountable party regarding the payment of stamp duty and filing of the return. In determining the rate of stamp duty which applies, the purchaser needs to form a view of the intention of the company on its acquisition of the property.

Residential Development Stamp Duty Refund Scheme

Where the 7.5% rate applies to the share acquisition, there may be a partial rebate of up to 11/15ths of the stamp duty paid in circumstances where the property is later developed for residential purposes.

There are several conditions in order to avail of the relief including that in the case of a multi-unit development, at least 75% of the land must contain dwelling units. A refund relating to a multi-unit development can be claimed on a phased basis.

The claim for a refund must be made within 4 years from the date which the local authority acknowledged the commencement notice as valid. Currently, the refund scheme will only apply to residential development commencing in accordance with a valid commencement notice up to 31 December 2022, the latest date for development being 30 June 2025.

Next steps

When considering a potential acquisition of shares in a company which has significant property assets, a purchaser will want to factor in the stamp duty cost. In some circumstances, this rate may be 7.5% rather than the 1% rate that applies to most share acquisitions.

While stamp duty is a liability of the purchaser, the intention of the seller/company regarding the property when it was originally acquired can determine the stamp duty treatment. The purchaser will want to ensure that it obtains sufficient information and evidence to support the stamp duty position as part of due diligence.

Where a higher rate of stamp duty is paid, there is a potential partial refund available where the commercial property is subsequently developed for residential purposes.

For more information, contact a member of our Tax team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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