Understanding Stamp Duty
Stamp duty is a tax applied to certain documents and transactions, primarily those involving the transfer of property or land. When someone buys a house, land, or building, they are typically required to pay stamp duty to the Irish government. The rate of this tax can vary based on the value of the property and its intended use, such as residential or commercial.
For residential properties, the rate is 1% for values up to €1 million, and 2% for amounts exceeding this threshold. Non-residential properties, like commercial real estate, attract a flat rate of 7.5%. It’s important to note that the responsibility for paying stamp duty falls upon you, the buyer.
The payment of stamp duty is a legal requirement and is usually handled by your solicitor during the property transaction process. Failing to pay stamp duty can result in penalties and interest charges. The revenue generated from stamp duty is used by the Irish government to fund various public services.
In some circumstances there are reliefs and exemptions, such as for first-time buyers or family transfers, which might apply to your situation. If you are considering purchasing a property and want to know if you might qualify for any reductions, the McCarthy + Co team will be happy to assist you.
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Frequently Asked Questions
Questions we are often asked in relation to buying a property.
Who must pay stamp duty?
It is almost always paid by the buyer in a property transaction. This applies to purchases of residential property, commercial property, and land. The duty is also applicable to certain leases and the transfer of shares or securities. The responsibility for paying stamp duty falls on the individual or entity acquiring the property, land, or asset. It's a key financial consideration in property transactions, and buyers must budget for this cost in addition to the purchase price. There are some exemptions and reliefs available, but generally, the buyer bears the duty cost.
When does stamp duty have to be paid and how is it paid?
Stamp duty must be paid within 44 days of the date the instrument (document of transfer). Payment is typically processed electronically through the Revenue Online Service (ROS). Your solicitor will manage the process, ensuring the correct amount is paid and the transaction meets legal requirements. Late payments can incur penalties and interest, so timely payment is crucial.
How is stamp duty calculated in Ireland?
Stamp duty in Ireland is calculated based on the value of the property being purchased. For residential properties, there's a tiered rate structure: 1% is charged on the first €1 million, and 2% on any amount over that. For non-residential properties, like commercial real estate or land, a flat rate of 7.5% is applied to the total property value.
What are stamp duty rates on new builds?
If you're purchasing a new build property, the calculation for stamp duty is often a little lower. Although the stamp duty rate for new properties is the same as second hand properties, it's calculated on the property's price excluding VAT, which currently stands at 13.5%. For instance, if you were to purchase a new build house at a cost of €300,000, the stamp duty owed would be €2,643. For a second hand property, the duty owed on a property of the same value would be €3,000.
Are there any exemptions to paying stamp duty on residential property?
There are exemptions and reliefs from stamp duty on residential property under certain conditions. Key exemptions include transfers between spouses, civil partners, or cohabitants, and transfers due to a court order related to divorce or separation. When purchasing your home through the local authority tenant purchase scheme, the maximum stamp duty payable is capped at €100. Additionally, if VAT was included in the price of your house, your stamp duty is calculated solely on the house's base price, excluding the VAT component. This approach ensures that stamp duty is applied only to the property's initial value, providing a more equitable tax calculation.
Is there any relief on farmland transfers?
Yes, there are. One key relief is "Consanguinity Relief," which applies to transfers of agricultural land between certain relatives. This relief reduces the stamp duty rate to 1% (as opposed to the standard 7.5% for non-residential property) if the transferee is a relative of the transferor. The relief is intended to facilitate the transfer of farmland within families. There are specific conditions and requirements to qualify for this relief, so it's advisable for individuals involved in such transfers to consult with your solicitor to ensure compliance and eligibility.
Do I have to pay stamp duty if I inherit a property?
In Ireland, inheriting a property does not typically require the payment of stamp duty. However, other taxes like Capital Acquisitions Tax (CAT) may apply. It's important to consult with a legal or tax professional for specific advice related to inheritance and associated taxes. The McCarthy + Co team will gladly assist, should you have any further questions around this.
Joseph McCarthy leads the conveynacing department at McCarthy + Co. Joseph has been an integral member of our team since 2013, bringing a unique blend of expertise and dedication to his role. Joseph provides a problem-solving oriented approach to property buyers and sellers throughout the conveyancing process.
Joseph can be contacted via email at: firstname.lastname@example.org
About McCarthy + Co
McCarthy + Co. are a team of solicitors with more than 30 years of experience in providing legal advice, guidance and assistance to clients across Ireland.
We are a family-run business with offices in Dublin and Cork, but we have dealt with clients everywhere from Galway and Limerick to Waterford. We are honest, plain-speaking and thorough – we will work alongside you to ensure your property sale or purchase is as efficient as possible.
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We are a multi-award winning firm, accredited by the Law Society of Ireland.