In his first Budget, Irish Minister for Finance Paschal Donohoe has announced significant changes in property taxation. One of his key aims is addressing housing and releasing existing and development land onto the market.
Donohoe has adopted a carrot-and-stick approach. Key incentives include:
- a stamp duty refund for commercial land purchased for housing development
- allowing pre-letting expenses to encourage owners of vacant residential property to renovate properties and bring them onto the rental market.
However, on the flip-side, he has brought in:
- an increase in stamp duty on commercial land from 2% to 6%
- an annual vacant site levy of 3% for sites vacant for a minimum of 12 months
- a reduction in the holding period for exemption from CGT for certain residential and commercial property from 7 years to 4 years, to free up land banked undeveloped property
Whilst the hike in commercial stamp duty is set to drastically increase exchequer receipts, the classification of residential development sites in Ireland as commercial property for Stamp Duty purposes is going to make it more expensive for home builders to purchase land and subsequently help address the housing supply issue. Let’s hope this does not have a long term impact on the desire for private pension funds and international buyers to invest in Irish land.
Minister for Finance Paschal Donohoe said he has received assurances from Revenue that the increase in stamp duty on commercial property transactions will deliver the required tax yield without dampening activity in the sector. The trebling of commercial stamp duty from 2 to 6 per cent announced in the budget is expected to net the exchequer €376 million per annum and ranks as the single largest revenue-raising measure.