Effects of Budget 2018 – Commercial Stamp Duty

On the 10th of October 2017, the rate of stamp duty on property acquisitions on non-residential property was increased from 2%-6%.

 On the 19th October 2017, the Finance Bill was published and the provisions were included, however these will not become law until the enactment of the Bill, which is expected to happen mid-December.

TRANSITIONAL MEASURES

The increase is subject to transitional measures for the retention of the 2% rate in cases where the property acquisitions have reached an advance stage, i.e. where a contract is in place before the 11 October 2017 that was binding on the parties to contract and the instrument contains a certificate to the effect. Accordingly, guidelines have been issued from the Revenue and the Property Registration as stated below.
Revenue:
The Purchaser’s solicitor has two options available to ensure that the correct amount of stamp duty is paid for a non-residential property being purchased during this transitional period:
(i) File a return through the e-stamping system, pay stamp duty at the rate of 6% and be issued with a stamp certificate. On enactment of the Finance Bill, the filer can request a refund of the difference in the stamp duty paid between the 2% and 6% rates by amending the return and submitting the relevant documentation to Revenue.

(ii) File a return through e-stamping system and pay the stamp duty at rate of 2%, in which case a stamp certificate will not be issued. On the enactment of the Finance Bill, Revenue will publish information on how the postponed stamp certificate can be obtained.
PRA:
The PRA will accept applications for registration on the condition that the transfer is executed prior to 1st January 2018 if paying stamp duty at a rate of 2%. This application must be accompanied by a solicitors letter stating:
(i) Setting out the situation
(ii) Evidence of the filing online and payment of the stamp duty [online return from Revenue and Transactional number]
(iii) An undertaking that the solicitor will lodge with the PRA the stamp duty certificate when available from Revenue.

The transitional measures will not affect the priority of the dealing. However, if the Stamp Duty Certificate is not produced by 31 January 2018 the dealing will be rejected and if and when relodged the date of registration will be the date of re-lodgement.

The Law Society website is issuing updates with regard to these transitional measures.

http://ezine.lawsociety.ie/9ocv5rhe5d31mbl382jcit?email=true&a=2&p=52626958&t=28930685

OVERALL EFFECT ON ECONOMY

In Budget 2018, the government have also introduced a cut in the capital gains tax exemption on investment property from seven to four years. Therefore, any person who has invested in non-residential property between 2011 and 2014, and have retained the property for four years or more, will be entitled to an exemption in capital gains tax on sale of the property. The government hopes to incentivise the sale of non-residential property and thus boosting stamp duty revenue.

It has been reported that it is having an impact for Banks in terms of lending as it is now a significant increase for the borrower and thus a factor the lending institution has to consider.

If you wish to seek advice in any of the issues raised in the above article, please do not hesitate to contact Jerry Canty or Mary Walsh on 021 4254100.

https://www.revenue.ie/en/corporate/press-office/budget-information/2018/budget-summary-2018.pdf