Property Transactions
There are multiple tax implications when an individual or business decides to sell a property. BCA’s specialist property advisory and taxation teams are experts in assessing the financial issues of any property transaction and the taxation issues that can arise throughout property ownership.
For property investors, the taxation of rental income is a significant income and for properties acquired for use as part of a business, the question always arises as to whether it is more beneficial to amalgamate the property with the other business assets or to retain in a Special Purpose Vehicle (SPV).
We Can Assist
At BCA, we understand that deciding to buy or sell a property as an individual or business requires careful consideration of the transaction’s appropriate taxation and cash flow implications. When acquiring a property, the purchaser must take due consideration of maximising the after-tax return if they sell the property.
Financing
- Property acquisition significantly impacts cash flow and reserves, depending on the individual’s or investor’s circumstances.
- The long-term nature of property ownership should align with long-term cash flow requirements.
- A detailed review is essential, including:
- Acquisition costs.
- Financing structures and associated costs.
- Income generated from the property.
- Loan repayment schedules.
Stamp Duty
- Payable by the purchaser on Irish-situated property:
- Residential Property: 1%-2% based on the property’s value.
- Commercial Property: Varies based on property type and lease terms.
- Depending on their length and terms, stamp duty may also apply to creating leases.
Rental Income
- Individuals: Rental income is taxable at 20% or 40%, based on the individual’s circumstances. Additional charges for PRSI and USC may apply.
- Companies:
- Active rental income is taxed at 12.5%.
Passive rental income is taxed at 25%. A close company surcharge may increase the effective tax rate to 40%.
VAT
- VAT on property transactions can be complex, subject to rules introduced in 2008.
- A thorough due diligence process is necessary to assess:
- The property’s history.
- Its intended use.
- Options may be available to minimise VAT implications for both vendor and purchaser.
Capital Gains Tax (CGT)
- Chargeable gains from the disposal of Irish property are taxed at 33%.
Capital Acquisitions Tax (CAT)
- CAT at 33% applies to gifts and inheritance of Irish-situated property, subject to various circumstances and exemptions.
This comprehensive framework ensures that all financial, tax, and legal implications are fully considered when dealing with property transactions in Ireland.
Your Property Specialists
Caroline heads the taxation department at the firm. With over 20 years of experience, she advises clients on personal and corporate taxation matters both domestically and internationally.