The 2021 Act gave statutory effect to a Financial Resolution that was passed on 19 May 2021. It inserts a new section 31E into the Stamp Duties Consolidation Act (SDCA) 1999. This imposed a 10 per cent rate of stamp duty on the acquisition, on or after 20 May 2021, of certain types of residential units where an aggregate of 10 or more such units is acquired during a rolling 12-month period.
The usual stamp duty rate that applies to the acquisition of residential property is 1 per cent of the value of property up to €1 million and 2 per cent of the value that exceeds €1 million. The 10 per cent rate applies in respect of the acquisition of residential units such as houses and duplexes but not apartments. The measure is intended to disincentivise the purchase of multiple residential units by a single corporate entity or individual.
The 2021 Act set out the various means by which a residential unit is treated as being acquired for stamp duty purposes and the date on which the unit is treated as being acquired. This date is typically the date of execution of the particular instrument (written document) that is used to effect the acquisition. For example, , a residential unit that is acquired by way of a conveyance or transfer on sale or a long lease (>35 years), respectively, is acquired when the conveyance or transfer or lease is executed.
Chapter 2 of Part 5 of the SDCA contains several anti-avoidance provisions that charge stamp duty on the ‘indirect’ acquisition of property such as gifts, exchanges and the acquisition of land combined with a related building agreement.
Where more than one of the different types of instrument referred to is used to effect the acquisition of a residential unit, it is the earliest instrument executed that is to be used to determine the date of acquisition.
Acquisition is in terms of the various means by which a residential unit can be acquired in such as purchases, transfers, leases, contracts and agreements. It contains the rules about how a person is to be treated as acquiring the required number of residential units to come within section 31E and be subject to the 10 per cent rate of stamp duty. Where a residential unit is acquired on or after 20 May 2021 (date immediately after date on which Financial Resolution passed), regard must be had to any other residential units acquired on the same date and at any time in the immediately preceding 12 months.
Where the aggregate of the residential units acquired during that period is at least 10, then each of those units become ‘relevant residential units’ for the purposes of the application of the 10 per cent rate of stamp duty. This provision is extended to take account of residential units acquired by connected persons as defined.
The 2021 Act relaxes the conditions imposed in relation to connected persons who are individuals rather than corporate entities. Connected individuals must be acting in concert or cooperating in some way or engaged in tax avoidance when they acquire residential units for their aggregated acquisitions to be taken into account for the purposes of subsection (5).
It excludes from section 31E a residential unit that is an apartment in an apartment block (as defined).
The 2021 Act refers to shares in companies, units in an Irish Real Estate Fund (IREF) and interests in partnerships that derive value, whether directly or indirectly, from a residential unit(s). This is for the purposes of treating certain acquisitions of such shares, units or interests as the (indirect) acquisition of the underlying residential unit(s).
There is an anti-avoidance provision, that takes account of shares/units/interests that derive value, in turn, from other shares/units/interests that derive value from an underlying residential unit. There is anti-avoidance provision intended to prevent arrangements that might ‘artificially’ reduce the value that shares/units/ interests derive from an underlying residential unit(s); for examle, by transferring assets from connected persons.
The 2021 Act changes the usual Head of Charge (in Schedule 1 to the SDCA) that would apply to the transfer of shares to the extent that they derive value from ‘relevant residential units’. The usual Head of Charge is the ‘CONVEYANCE or TRANSFER on sale of any stocks or marketable securities’. This is changed to the Head of Charge ‘CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance’.
The ‘stocks or marketable securities’ Head of charge applies stamp duty at the rate of 1 per cent whereas the ‘property’ Head of Charge applies stamp duty at the rate of 1 per cent on the value of residential property up to €1 million and at the rate of 2 per cent on the value in excess of €1 million. However, stamp duty at the new higher rate of 10 per cent will be applied in respect of the acquisition of property that is a ‘relevant residential unit’ (i.e. aggregate of 10 or more units acquired).
The 2021 Act sets out the circumstances that could bring the transfer of shares/units/interests into the alternative Head of Charge. This is where sufficient shares/units/interests are transferred to change the ownership of the company, IREF or partnership and the person(s) that have direct or indirect control over a ‘relevant residential unit(s)’.
There are anti-avoidance provisions intended to pre- empt certain arrangements that might prevent a residential unit becoming a ‘relevant residential unit’. Certain transfers of shares/ units/interests by connected persons or in tranches can be treated as a single transfer.
The Act provides for a date of acquisition of a residential unit that is indirectly acquired where shares/ units/interests are acquired.
Any unpaid stamp duty, interest and penalties to be a charge on the residential unit to which they relate until such time as they are paid.
There are ransitional provisions that exclude from the new 10 per cent stamp duty rate residential units in respect of which binding contracts for their acquisition were entered into before 20 May 2021. However, such acquisitions must be concluded before 20 August 2021. A ‘relevant residential unit’ that was acquired in the 12-month period preceding 20 May 2021 not to be subject to the 10 per cent rate. The 10 per cent rate is disapplied.
Thes provision of an incorrect statement (required under subsection (17) to qualify for the transitional provisions) is a penalty offence for the purposes of section 1078 of the Taxes Consolidation Act 1997.
The 2021 Act disapplies some existing exemptions so that ‘relevant residential units’ can be chargeable at the 10 per cent stamp duty rate. These apply to shares and units in certain charitable entities, pension schemes and investment undertakings. There is provision for the payment of the additional stamp duty where a residential unit was not a ‘relevant residential unit’ when it was acquired but becomes such a unit when a person later acquires sufficient units to breach the threshold of 10 units in aggregate. In this situation, the additional stamp duty is payable (difference between 1 per cent/2 per cent and 10 per cent) when the stamp duty on the later acquisition is payable.
Where section 31E applies to a transaction involving the acquisition of residential units that might also be chargeable under anti-avoidance provisions in sections 31C (shares deriving value from Irish land) and 31D (company cancellation schemes of arrangement), section 31E takes priority, but only in respect of the value attributable to ‘relevant residential units’.
The 2021 Act amends the charge that applies for acquisitions of residential properties by providing for a rate of 10 per cent where section 31E applies; i.e. for a ‘relevant residential unit’, unless the transitional provisions apply. There is 10 per cent rate for lease premiums paid in respect of a ‘relevant residential unit’ where section 31E applies.
There is an exemption from the new 10 per cent rate of stamp duty where residential units are leased to local authorities for certain social housing purposes. These are leases under the ‘Mortgage to Rent’ scheme, whereby properties that are surrendered to the financial institution holding the mortgage are sold to a private company in tandem with an agreement to then lease the property to a local authority, who in turn leases it to the existing occupants so that they can continue to live in the property.
There is an exemption from the 10 per cent rate of stamp duty in a situation where a residential unit is acquired and immediately leased to a housing authority for use in the provision of social housing support.
Finance (Covid-19 and Miscellaneous Provisions) Act 2022 provides for a partial repayment of stamp duty charged at the higher 10 per cent rate for residential properties that are designated as “cost rental dwellings” subsequent to being acquired. The standard rates of stamp duty for residential property are currently 1 per cent on values up to €1 million and 2 per cent on values exceeding €1 million.
It provides for a higher 10 per cent rate of stamp duty to be charged where a person acquires 10 or more residential properties (excluding apartments) in any 12-month period. It applies where, within 6 months of being acquired, a residential property is designated as a cost rental dwelling by the Minister for Housing, Local Government and Heritage under Part 3 of the Affordable Housing Act 2021. Where section 83F applies, Revenue will repay any amount of stamp duty paid over and above the standard rate.