Budget 2018 confirms a change in stamp duty on commercial property transactions from 2% to 6% effective from midnight on 10 October 2017. Stamp duty on residential property is still 1% on the first €1m and 2% on the excess over €1m. We understand that transitional measures are to be introduced so that these changes will not affect binding contracts to purchase commercial property entered into before 11 October but not completed until after this date provided that the conveyance takes place by a certain date. The Government has also revealed that a stamp duty refund scheme is to be introduced for commercial land purchased for the development of housing, subject to certain conditions, including that the land is developed within 30 months of the land purchase. Further details of this refund scheme and the proposed transitional measures in relation to existing contracts are awaited and are expected to be set out in the Finance Bill. The Government has stated that this stamp duty change has been made to avoid overheating in the building and construction sector generally and to re-balance activity away from commercial to residential development.
In order to further encourage residential development, the vacant site levy, due to take effect from 2019, will increase from three per cent to seven per cent in 2020 and subsequent years unless the site is developed in the meantime.
In 2012 & 2013, in order to stimulate activity in the property market, the Government introduced full relief from capital gains tax on disposals of land or buildings acquired between 7 December 2011 and 31 December 2014 provided the land or building is held for a period of 7 years. Budget 2018 has reduced this 7 year period to 4 years to reduce any impact it may have on limiting the supply of development land available for sale.
Budget 2018 also introduces a new deduction for pre-letting expenses capped at €5,000 per property to encourage owners of residential property which has been vacant for 12 months or more to bring that property into the rental market. The relief will be subject to clawback if the property is withdrawn from the rental market within 4 years. The relief will be available for qualifying expenses up to the end of 2021.