Home Knowledge Finance Bill 2017 – Key Commercial Property Measures

Finance Bill 2017 - Key Commercial Property Measures


Budget 2018 was announced on 10 October 2017 and details of the key property measures were set out here. While the Finance Bill 2017 has put some flesh on the bones, we await further legislation for detail of certain other key commercial property measures announced in Budget 2018. 

7-year Capital Gains Tax (CGT) Relief

The 7-year CGT relief provisions (sometimes referred to as the “CGT holiday”) will be amended to allow the owners of qualifying assets to sell those assets between the fourth and seventh anniversaries of their acquisition with the CGT exemption continuing to apply. This relief applies to disposals made on or after 1 January 2018.

Vacant Site Levy

The vacant site levy of 3% of the market price of undeveloped land registered on the Vacant Sites Register is to apply in 2018. The vacant site levy is to be increased to 7% per annum where the land remains undeveloped in 2019 and in subsequent years.  

This means that any owner of a site on the Vacant Sites Register who does not develop their land in 2018 will pay the 3% levy in 2019 and then become liable to the increased rate of 7% from 1 January 2019. In order to have the levy lifted, development should commence on the site.

These amendments are not included in the Finance Bill. We will provide an update once details are available.

Stamp Duty

Budget 2018 has increased the rate of stamp duty on commercial property transactions from 2% to 6% effective from 11 October 2017. Transitional arrangements allow certain purchasers to avail of the lower 2% rate of stamp duty. Purchasers with binding contracts in place before 11 October 2017 may avail of the transitional arrangements provided that the instrument of transfer is executed before 1 January 2018 and contains a statement, in such form as Revenue may specify, certifying that the instrument was executed solely in pursuance of a binding contract entered into before 11 October 2017. As these transitional measures are contained in the Finance Bill, they are not yet in law. Until the Finance Act is passed the increased 6% rate applies. Recognising the difficulties, Revenue has published an eBrief providing tax payers with two options:

  1. “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 then 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, or
  2. File a return through the e-stamping system and pay the stamp duty at the rate of 2%, in which case a stamp certificate will not be issued. On enactment of the Finance Bill, Revenue will publish information on how the postponed stamp certificate can be obtained.”

A stamp duty refund scheme will be introduced for developers who purchase commercial land for housing development and who commence the relevant development within 30 months of the land purchase. There are no details of the scheme in the Finance Bill 2017. We will provide an update once details are available. 

The stamp duty exemption for transfers of property between closely associated companies has been updated to take account of a “merger by absorption” type of merger. In the case of merger, the requirement for the transferor and the transferee companies to continue their association for the two year period following the transfer of the beneficial interest in the property is dis-applied. However for a two year period the beneficial interest in the property must be held by the transferee and the beneficial ownership of the transferee must remain unchanged. Stamp duty reorganisation reliefs have also been amended to deal with mergers undertaken in accordance with the Companies Act 2014.

Irish Real Estate Funds Regime

Technical changes to the existing Irish Real Estate Funds (IREF) regime proposed by the Finance Bill 2017 may impact direct and indirect IREF investors. We review the main changes and flag recommended actions. 





Quoted Property Company Shares

To date shares which derive the greater part of their value from Irish real estate were not considered IREF assets where those shares were quoted on a stock exchange.  To remain outside the category of an IREF asset following the enactment of the Finance Bill, not only must the shares be quoted on a stock exchange, but they must also be “actively and substantially traded on such stock exchange”.  This change follows a more general change to the scope of Irish capital gains tax for non-Irish tax residents. 

Any Irish investment funds which do not currently meet the definition of an IREF but hold quoted shares that derive the greater part of their value from Irish real estate should urgently review their investments to determine whether they will now become an IREF.

 Anti-Avoidance Measures

There are several changes which appear designed to tighten up existing anti-avoidance provisions.  These changes include:

  • Extending the definition of a holder of excessive rights by including the holdings of connected persons;
  • Limiting refunds of IREF withholding tax to only the IREF withholding tax suffered in respect of IREF taxable profits arising from the date the unitholder entitled to the refund invested.  It is not entirely clear how this provision will operate in practice.
  • Further limiting refunds of IREF withholding tax to only bona fide commercial transactions that do not form part of a tax avoidance arrangement

Any IREF investors subject to the existing IREF anti-avoidance provisions should review their arrangements in light of the proposed changes.

 Irish Pension Related Investors

The exemption from the IREF regime is extended to several other pension arrangements including ARFs, AMRFs and vested PRSAs.

Any ARF, AMRF and vested PRSA investors holding IREF units should ensure they make the necessary administrative filings to obtain exemption from IREF withholding tax

 Indirect IREF Unitholders

Gains arising to non-Irish tax residents on the disposal of an asset, such as shares in a company, which derives the greater part of its value directly or indirectly from units in an IREF will no longer be within the charge to Irish Capital Gains Tax.

The proposal as drafted does not strictly speaking remove the obligation on the purchaser under Section 980 Taxes Consolidation Act 1997 to apply 15% withholding tax on the consideration for such assets deriving their value from units in an IREF.  However we understand that Revenue will clarify that Section 980 will not apply in such circumstances.

Shareholders selling such shares should ensure that the prospective purchaser is not intending to apply such withholding tax. 

 Tax Administration

There are helpful administrative changes which will reduce the administrative burden and cash flow impact of the IREF Regime.  These changes include:

  • Introducing a new concept of a qualifying intermediary who can hold IREF units on behalf of certain exempt investors without incurring an IREF withholding tax; and
  • The introduction of preclearance for direct and indirect investors who would be entitled to a refund of any IREF withholding tax i.e. where the investor would be entitled to a refund of the IREF withholding tax they can seek preclearance from Revenue to receive the payment from the IREF without any IREF withholding tax thereby avoiding the need to suffer the tax and seek a refund.

 Investors should consider whether they can take advantage of these administrative changes to relieve their administrative burden and improve cash flow.


Contributed by: Ted McGrath, Shane WallaceTara Rush



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