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Irish Property and Construction - Tax  Guidance for Investors & Developers

04 December 2020 By Michael O'Mahony

If you are looking at investing in Ireland in real estate or in undeveloped property with a view to develop it, then you will need to understand a whole range of legal and taxation rules before committing to a transaction.


Consideration of the following points and understanding the subtle differences that these aspects of a property investment present will be necessary in your planning and research into progressing your project:


Are you investing in residential, commercial, undeveloped property or land? Differing rates of VAT, Stamp Duty will apply to these differing circumstances.


What is your intended use of this property once completed? Is it a buy to let arrangement, commercial premises for own use,  development as part of your construction business  or some other reason? 


Investing in developed property is a big step towards generating inward cashflows earlier, requires a larger investment but the return on investment will crystallise sooner. 


There will be Income tax and corporation tax consequences of an investment in both developed & undeveloped property. The tax rate  that will apply will depend on whether you hold the investment personally or via a company. If this is a business acquisition will the property activity be that of a normal trade or investment?


For undeveloped property and land there will be additional project management responsibilities, perhaps long term ones, before you will be in a position to recoup your investment. Do you have the skills, connections, resources and funding to do this?


Relevant contracts tax (RCT) will apply to a development project which is a 'relevant contract ' and this will include a site based project located in Ireland. There are compliance obligations on the principal contractor which must be managed through the Revenue Commissioners online portal. Therefore any self employed subcontractors engaged on the project will carry significant obligations on the principal.   The onus is on the principal contractor to get this right in terms of registering the contract and notifying payments made, otherwise penalties may apply and these range from 3% to 35%!.


When buying property will this be as an  individual, joint or company transaction? There are long term tax issues to consider such as Capital Gains Tax (CGT)  connected with the eventual disposal of the property and these can impact the tax cost of the transaction.


Clearly there is much to consider when  dealing in Irish property.


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Tagged With: Developed Property, Undeveloped Property, Irish Property, Relevant Contracts Tax, Capital Gains tax