Minister provides lenient cut-off date on new stamp duty rate

Commercial property deals signed prior to October 11th, the day before last week’s budget, will not be liable to the new 6 per cent rate of stamp duty.

The transitional arrangements applying to the new rate, which has been sharply criticised by industry, were contained in the Finance Bill published yesterday.

The Bill stipulates that binding contracts in place prior to the October 11th date would enjoy the old 2 per cent rate provided conveyances or transfers were executed by the end of the year.

Minister for Finance Paschal Donohoe expects the new 6 per cent tariff on transactions to yield an additional €376 million in revenue for the exchequer.

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However, experts have warned his projection is unlikely to materialise as it is based on last year’s activity levels, which were inflated by a sell-off of assets by Nama and the banks.

While the lenient cut-off date for transactions liable for the new rate will be viewed as a concession to the industry, it casts further doubt on the Minister’s projection.

As expected, the Bill also included an extension of stamp duty relief on commercial transactions, which include agricultural land, for farmers.

Following criticism from the farming industry, the Minister decided to exclude interfamily sales and transactions where the buyer is under 35 years of age from the new rate.

Sugar tax

The Finance Bill, which gives legal effect to the various taxation measures announced in the budget, provides for the introduction of a new sugar tax on sweetened drinks. The Bill noted that the tax would apply on the first supply of drinks after the introduction of the tariff on April 1st next year.

In the budget, Mr Donohoe also announced a doubling of the proposed vacant site tax levy from 3 to 7 per cent. In practice, this means landowners who do not develop their land will pay the original 3 per cent levy in 2018 and then become liable for an increased rate of 7 per cent from 2019 onwards.

The Bill supplemented this with a tax relief for pre-letting expenses incurred prior to the letting of a residential property that has been vacant for at least 12 months in a bid to encourage property owners to bring more vacant property into the rental market.

The Bill, which contained 78 sections – the majority of which implement the changes announced in the budget – also contained a provision to make health or dental employees and their family members, who are in receipt of a discounted health or dental insurance policy, liable to pay tax on the benefit.

As signalled in the budget, the Bill also gave effect to the reduction in the capital gains tax exemption on certain property assets from seven to four years

This will allow the owners of land and buildings purchased between December 2011 and December 2014 to enjoy a full CGT relief if they have owned the land for at least four years and for no more than seven.

The Bill also gave effect to an 80 per cent limit on the quantum of relevant income against which capital allowances for intangible assets may be deducted in a single tax year so as to allow “some smoothing” of corporation tax receipts for the exchequer.

“Today’s publication of the Finance Bill 2017 provides the necessary legislative foundation for implementing the tax measures announced on budget day,” Mr Donohoe said.

“In line with our commitment to budgetary reform, it has been published as soon as possible after budget day. It now moves forward to be debated in the Dáil and Seanad and I anticipate a constructive discussion on the Bill over the coming weeks with my parliamentary colleagues,” he added.