On 19 May 2021, the Irish legislature passed a financial resolution introducing a new stamp duty rate of 10% targeted at the “bulk buying” of certain residential units.
Scope of the new rate
The new higher stamp duty charge of 10% will take effect once a 10th property has been acquired in a 12-month period. This means that where a person or institution has incrementally acquired residential units and reaches the 10-property threshold, the higher stamp duty rate will apply to all 10 of the residential units with previous payments of stamp duty at the standard duty being offset against the new 10% charge.
The new charge will apply to residential units within Ireland with no distinction being made between new or second-hand residential units. While residential units within an ‘apartment block’ (a multi-story residential property that comprises or will comprise not less than 3 apartments grouped with common areas) are specifically exempt from the new charge, it appears that duplexes will fall within the scope of the new measures.
Multiple purchases by local authorities and approved housing bodies are exempt from the new measure.
The new measure provides that the term “acquisition of a residential unit” includes conveyances on sale, deemed conveyances on sale, voluntary conveyances and leases in excess of 35 years.
Units purchased before 20 May 2021 will count towards the threshold of 10, but the new rate will only apply to units bought after the financial resolution came into effect on 20 May 2021. For example, if 6 units were acquired in April, and 5 units were acquired in June, the April acquisitions would not be subject to the new charge but will be taken into account for the purposes of determining whether the higher stamp duty charge should be applied to the June acquisitions.
The new measure contains “connected party” provisions to ensure that group structures are not used to circumvent the rules and make disaggregated acquisitions in excess of the 10-property threshold. However, where the connected parties are natural persons and are not acting in concert the “connected party” provisions will not apply.
The new rules also contain anti-avoidance provisions to cover situations where multiple purchases of “relevant residential units” are made indirectly through the acquisition of shares in a company, units in an IREF, or interests in a partnership. In such circumstances, where there is a sale or transfer of shares, units or partnership interest that results in a change in the person or persons having direct or indirect control over the residential units, the new 10% stamp duty charge will apply to the value of the shares, units or partnership interest to the extent that the value is derived from “relevant residential units”.
It is unclear how these measures will operate in practice and many industry practitioners have commented that they will be seeking further clarification on this.
Statute of Limitations
The new measure provides that any stamp duty, including any interest or penalties, that is due in respect of a relevant residential unit will remain as a charge on the property until such time as it is paid in full, notwithstanding the Statute of Limitations Act 1957.
The new measure applies with effect from 20 May 2021. However, on the advice of the Attorney General’s office, there is a requirement for a 3-month transition period for execution of contracts that have been entered into but not completed prior to the commencement of the new measure (20 May 2021). Accordingly, the “old” residential stamp duty rate (i.e. 1% on the first €1 million of consideration and 2% on the excess) will apply where a binding contract was entered into before 20 May 2021, and the instrument effecting the acquisition is executed before 20 August 2021.