Tax on Documents
Stamp duty was traditionally, and remains largely, a tax on documents, rather than on transactions. If there is no document, it may be possible to avoid stamp duty. However, there exist anti-avoidance legislation which applies in certain circumstances to provide that certain types transactions are subject to stamp duty, even if there is no document which gives effect to them.
Traditionally, stamp duty was paid by the impression of Revenue stamps on executed instruments. In this context an instrument refers to a document giving effect to a legally significant act or transaction, most commonly a deed. Execution refers to giving effect to the document. This may be execution as a deed or by signing.
Until the end of the 20th century, documents were stamped by impression of stamps made up of various fixed denominations (in multiples of tens and in units) on the document upon physical presentation of the instrument to the Revenue Commissioner stamping office and payment of the relevant amount.
In late 1990s, this impression of multiple stamps of fixed denominations (which together came to the duty paid) was replaced with a single stamp, containing certain digital information which was impressed on the side of the instrument. It stated the exact amount of duty paid r than a combination of stamp).
In December 2009, the Revenue introduced e-stamping. Physical stamping is no longer permissible. All returns must be made to the revenue online service (ROS).
Only in exceptional cases, will paper returns be permitted. Revenue issue certificate with unique numerical identified, which is printed and attached to the relevant instrument.
The concept of a “conveyance” in the context of real property transfers and sales, is quite specific and refers to an in instrument which transfers a freehold interest in real property. However, under stamp duty law, a “conveyance” means any document whereby any right or property in any asset is transferred. It iis not limited to “real property” (land and buildings).
In accordance with the above principles, many attempts to transfer assets by indirect means, fail because one document, which is part of the transaction is interpreted to be and is thereby deemed to be a “conveyance” under the stamp duty legislation. It is accordingly stampable.
Stamp duty applies when an instrument becomes effective. A deed of land must be executed by signing and delivery. See the section on deeds. Delivery has a specific menaing in a legal context which refers to both the physical and the attendant intention of the grantor.
Delivery may be made in “escrow”, which means that it is subject to pre-conditions. In this case, the deed may not take effect, unless and until the relevant conditions are satisfied. Accordingly the date of the deed, may be the date of execution, but the date in which it is delivered (and thereby becomes effective) may be later.
Stamp duty arises only, where there is a document, or in limited cases, a transaction, which falls within one of the defined “heads” (categories) of charge. Outside of this, the duty does not apply. At one time in the 19th century, stamp duty applied to have a very wide range of documents and instruments. Over time, the number of stampable document has reduced considerably.
Stamp duty arises a stampable instrument, which is executed in the State. Stamp duty also applies to documents executed outside the State where it relates to property situated in the State or to matters or things to be done in the State. There are exceptions. Unlike the case with other taxes, the residence and domicile of the parties is usually irrelevant.
The rates of stamp duty are set out in legislation. They have been amended frequently, and quite radically, in recent years.
Formerly, rates on deeds selling or transferring residential and commercial real property, were as high as nine percent. Following the financial crisis, the acknowledged over reliance on cyclical taxes such as stamp duty and an several years of a stagnant property market, the residential and commercial property rates were reduced, significantly.
Whereas, formerly a nine percent rate applied at relatively low price levels, a 1% rate applies to residential transactions under €1,000,000 and a 2% rate applies over that level.
The general rate for non-residential property is 7.5%. Before that it was 9% and earlier 2%.
As with other taxes, there are exemptions and reliefs which may apply in particular cases. In some cases, the exemption must be applied for. In other cases, it arises automatically.
The traditional position is that in the absence of written document, no stamp duty liability arises. Most transfers of property are required to be by deed, effected or reflected in writing and signed. This includes in particular, transfers of interests in real property (land and buildings) and of shares.
A contract for the transfer of an interest real property, must be evidenced in writing and signed by the party to be enforced against. The transfer of an interest in real property must be by a deed, or an equivalent Land Registry form, executed as a deed. A deed must be in writing and must be executed as a deed. The transfer of shares must be in a statutory format, which provides for a signed transfer.
The e-commerce legislation contemplates the possibility of electronic transfers of real property. . However, for the moment, transfers of real property may not be effected through electronic communication.
Formally it was possible to avoid stamp duty by not having a deed. Following contract, and the payment of the purchase price, the seller holds the property as a nominee for the buyer under resulting trust. This is called “resting in contract”. Since 2013, it is not possible to avoid stamp duty by so-called resting in contract, where more than 25% of the purchase price is paid.
Stamp duty legislation has long provided in relation to most assets other than real property, that the contract for the transfer of the asset is stampable. This includes goodwill, debts and business assets..
A transfer of personal or movable property (goods) is potentially stampable if effected by a signed instrument. It is a “conveyance on sale” for stamp duty purposes. An instrument transferring title to goods is referred to a bill of sale. A contract for the sale of personal / movaeble property followed by transfer of title by physical delivery avoids stamp duty.
There is no anti-avoidance provisions applicable to a contract for the sale of goods. However, if an instrument transferring the goods is in fact created, this will itself be stampable at a non-residential stamp duty rate (now 7.5 percent).
Notwithstanding that revenue legislation is interpreted against the interests of the Revenue, stamp duty legislation has long been interpreted in a broader manner. Where parties try to avoid a stampable document in an artificial way, the courts are willing to deem any document in writing which used in the transaction, to be a stampable conveyance, where this is intended to be the sole document which gives effect to the transaction. They may even deem the sale contract to be a conveyance on sale, where the courts infer the requisite intention.
Stamp duty legislation looks at the transaction in its entirety. If at the time the transaction was entered, the parties intended to record it in some manner, however informally, that document may be categorised as a conveyance or as an agreement for sale of non-real property assets, each of which is stampable..
In practice, parties usually wish to have legal certainty. If a transaction is capable of being legally effective without a document, there is a risk the absence of written documents makes the transaction difficult to prove. Accordingly the parties may create a written document, even if one is not strictly necessary.
In some cases, anti-avoidance legislation applies to documents which would not otherwise be stampable. For example, at leasehold interest can be so surrendered to the landlord by a physical symbolic delivery of possession. Anti-avoidance legislation provides that any document which evidences such a surrender is itself, stampable.
Leading and Multiple Purposes
If an instrument embodies several distinct transactions, it may be stampable in respect of each of them. Where a deed transfers, property which is subject to different rates (e.g. mixed residential and commercial), the value will be apportioned. Accordingly a transfer or conveyance of a mixed residential and business use property, requires that value be apportioned and that stamp duty be paid on the each part, at the relevant rate.
There is a further principle, which at first appears counter to the above principle, that a document is stamped for its leading and principle purpose. Accordingly if that primary transaction or purpose is exempt, or is subject to a lower rate, the secondary purpose might be ignored. It must be ancillary. If the one instrument embodie separate transactions, then each is stampable.
Stamp duty liability is fixed at the time the instrument is executed. Where the consideration is not fixed or is to be ascertained, the legislation makes provision as follows. Where the consideration cannot be ascertained at the date of conveyance, the duty is charged on the market value of the asset concerned.
Where consideration consisted of an ascertainable amount payable for period less than 20 years, duty is charged on the total payments, Where the period exceeds 20 years, the period after 20 years is ignored. The future payments are not discounted.
Where the consideration is not in cash terms, then strictly the transaction is not stampable under the “conveyance on sale” heading. However, such transactions are deemed conveyances on exchange under separate provisions in the legislation. In broad terms, the transaction is taxed at the market value of the consideration.
Where property is transferred in consideration of the assumption of a debt due or subject to paying or transferring any money or stock to a third party, the money, debt or stock is deemed consideration.
In the case of a lease where the premium (i.e. the price for its grant) cannot be ascertained, stamp duty is paid on the rent at the normal rate and also on the capital premium which would have been achieved in the open market. Conversely where the property is sold for an ascertained premium and an unascertained rent, there will be deemed for stamp duty purposes, a market rent.
There are special rules in relation to leases of land connected with building agreements for the construction of a dwelling house or apartment more commonly. If the agreements are linked, the stamp duty is on the basis of the site price and building cost. If the building cost contract price cannot be ascertained that it is to be 10 times the market value of the land, A claim may be made within three years once the actual costs are ascertained.
In the case of a combined land sale and building contract for a dwelling house which are interlinked, it is deemed that the building work is ten times the value of the land. This reflected general assumptions on land building cost applying when the legislation was first introduced in 1991.