Explainer: the 1% duty that applies to a rising number of rental properties in Ireland

A little known 1 per cent stamp duty kicks in for tennats in rental properties above €2,500.

A 66 per cent increase in rents since the crash means that half of all three-bed houses and one in three apartments in Dublin are now in that rental bracket, adding an additional €300 or more per annum to the annual rent cost.

Below we explain this stamp duty charge.

Q. I thought you only had to pay stamp duty on property purchases?

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At €4,000 a month, my property earns more than I do

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A. Usually, yes. However there is a longstanding provision for Revenue to claw back money on rental agreements for higher-valued properties. The threshold for annual rents to be charged stamp duty at a rate of one per cent was set at €19,050 prior to 2008, or just under €1,600 per month. The threshold was subsequently raised to €30,000, or €2,500 per month, to take vulnerable tenants out of the tax net at the onset of the economic crisis.

Q. Who has to pay?

A. The person or people renting the property are solely responsible for paying the yearly levy of €300 or more.

The landlord bears no responsibility for payment of the tax. The fee is payable via a standard stamp duty return which can be filed on the Revenue Online Service (ROS).

Q. What if the rent is split between a number of tenants?

A. Stamp duty is payable on the overall value of the lease, and responsibility is not diluted even if smaller amounts are paid by a number of people. According to the Revenue, if more than one person is accountable "they are jointly and severally liable to pay stamp duty".

Q. How many rentals qualify for stamp duty and how much does it raise?

A. The trend of spiralling rents has seen more leased properties caught in the stamp duty tax net over recent years. Figures released to Social Democrats TD Catherine Murphy via a Parliamentary Question show that stamp duty was paid in relation to 80 lease agreements nationwide in 2013, raising just €50,000 for the exchequer.

The numbers have increased gradually over the following years rising to 140 in 2014, 178 in 2015 and 238 last year. The annual return to the exchequer has trebled to €150,000 over the period, and the average value of stamp duty paid has remained around the €625 mark.

According to Goodbody Stockbrokers 55 per cent of thre-bed family homes are seeking a rent over €2,500 per month. A third of all apartments in the capital are now in that bracket.

Q. What does this mean for rents going forward?

A. From a renter's point of view the projections are dire, particularly for those living in the capital. Average monthly rent for a four-bed house has already surpassed the €2,500 figure in many parts of Dublin according to the latest pricing report from property website Daft.ie, and there is little to indicate that the upward trend will be arrested anytime soon.

An analysis of over 800 rental properties hosted on the MyHome.ie property website shows that almost a quarter have a rental price of €2,500 or over, and popular areas for more expensive properties include Ballsbridge, the south inner city, Grand Canal Dock and Dublin 4.

This brings the added complication that tenants who have had their lease agreements revised upwards may not be aware of the little-known liability, although this is also regarded as an area of taxation which is difficult for the State to monitor given price fluctuations.