The Irish Minister for Finance has announced an increase in the stamp duty charge to 10% on the purchase of 10 or more ‘residential units’.

The main points in the Financial Resolution, which passed on 19 May 2021 are as follows:

• The 10% rate will apply where 10 or more ‘relevant residential units’ are acquired by a purchaser within a 12 month period and is designed, in particular, to affect purchases of houses.

• Once a purchaser acquires a relevant residential unit that brings the total number of such units that they have acquired in a 12 month period to 10 units, the stamp duty payable on each such unit acquired on or after 20 May 2021 will be 10 per cent. The increased rate will retrospectively apply to the previous nine units purchased, save for any units acquired by the purchaser before 20 May 2021 or falling under the transitional measures mentioned below. So, for example, if a purchaser acquired five houses in March 2021 and five in July 2021, the increased rate will only apply to the five units acquired in July 2021. However, the number of houses acquired in March 2021 will be taken into consideration when calculating the number of units acquired by the purchaser in the previous 12 month period.

• Residential units in an ‘apartment block’, which is defined in the Resolution as being a ‘multi-storey residential property that comprises, or will comprise, not less than three apartments with grouped or common access’ will be exempt from the stamp duty increase and will not be included in the calculation of the 10 residential units which will trigger the increased stamp duty rate. This will include most apartments but it will depend on the nature of the apartment block as to whether a particular apartment or duplex will be exempt from the stamp duty increase.

• The increased rate will apply to all Irish dwellings acquired, other than residential units in ‘apartment blocks’, regardless of location. That is, it will apply where there are multiple dwellings in one estate or 10 or more single dwellings in different locations across the country.

• There is a three month transitional period which means that contracts already exchanged prior to 20 May 2021 and which complete before 20 August 2021 will not be affected by the increase.

• The Resolution contains certain anti-avoidance measures relating to acquisitions by connected persons and transfers of shares or units that derive their value from houses which result in a change in the person or persons having direct or indirect control over the residential unit concerned.

• Local Authorities, Approved Housing Bodies and the Housing Agency will be exempted from the increased stamp duty rate.

• In introducing the Financial Resolution to Dáil Éireann on 19 May 2021, Paschal Donohoe TD indicated that legislation will be passed in the coming weeks to underpin the measures. This legislation may clarify certain aspects of the Resolution.

Comment

The change in the stamp duty regime comprises part of the government response to the purchase by institutional investors of all or substantial proportions of residential housing estates which gained significant attention in the Irish media in recent weeks. The change is heavily influenced by the broader concern about a lack of supply of housing in Ireland and consequent pressure on rents and house prices.

Any purchaser who has already acquired a number of residential units or who is considering purchasing 10 or more residential units in any 12 month period will need to be mindful of the increased liability to stamp duty.

It will remain to be seen what impact the stamp duty changes will have on purchasers, renters and developers. Instead of increasing the supply of housing, the new measures could negatively impact on the delivery of housing to the detriment of both renters and purchasers.

For more information contact a member of our Real Estate team.

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