Stamp Duty

Question 1

What is Stamp Duty?

Answer 1

Stamp Duty is a tax on certain instruments (written documents).

Stamp Duty is chargeable on instruments that transfer land and buildings situated in Ireland. Such instruments are usually called ‘Deeds of Transfer’ or ‘Deeds of Conveyance’.

Question 2

What is a legal ‘instrument’ and can you provide examples?

Answer 2

A legal ‘instrument’ is a document that formally records the legal efficacy or validity of an act, process, or agreement and serves as a mechanism for doing something legally binding. Examples include:

1. Sale of Land Contract
2. Settlement Agreement
3. Lease Agreement

Question 3

What are examples of transactions where Stamp Duty is charged based on an ad valorem rate?

Answer 3

Stamp Duty is charged on an ad valorem basis (according to value) for:

1. Shares: 1%
2. Residential. Property: 1% on the first €1 million, 2% on the balance over €1 million
3. Non Residential Property: 7.5%

Ad valorem rates mean the duty is calculated as a percentage of the transaction value.

Question 4

What are examples of transactions where Stamp Duty is charged a fixed amount?

Answer 4

Stamp Duty is charged at a fixed amount for:

1. Cheque: €0.12 (max. €5 p.a.)
2. ATM Withdrawal: €30 p.a.
3. Credit Card: €30 p.a.

Fixed rates mean the duty is a specific set fee regardless of the transaction value.

Question 5

What qualifies as a “Bulk Purchase” of residential properties for Stamp Duty purposes, and what is the applicable rate?

Answer 5

A “Bulk Purchase” of residential properties occurs when:

Criteria: Purchasing 10 or more residential houses or duplexes either at one time or cumulatively within a 12-month period.

Stamp Duty Rate: An increased rate of 10% applies to these transactions.

Exclusion: This increased rate does not apply to apartments.

Question 6

When should Stamp Duty be filed and paid?

Answer 6

Stamp Duty must be filed and paid within 44 days of the execution of the instrument (i.e., upon signature).

Question 7

How should Stamp Duty be filed and paid?

Answer 7

Method: Via self-assessment.

Process: File and pay online using the Revenue Online Service (ROS), commonly referred to as e-stamping.

Question 8

Who is responsible for filing and paying Stamp Duty in the case of a transfer on sale?

Answer 8

The Purchaser pays the Stamp Duty.

Quoted Shares: Stamp Duty is collected and paid by the Stockbroker.
Property & Unquoted Shares: Stamp Duty is collected and paid by the Accountant or Solicitor.

Question 9

Who is responsible for filing and paying Stamp Duty for leases?

Answer 9

The Lessee is responsible for paying Stamp Duty on leases.

Question 10

Who is responsible for filing and paying Stamp Duty in the case of a gift?

Answer 10

Stamp Duty can be paid by either party involved in the gifting transaction, usually as agreed upon by both parties.

Question 11

What is a ‘Conveyance’ in real estate transactions?

Answer 11

A ‘Conveyance’ is a legal instrument used to transfer ownership of property from one person to another.

It involves a formal agreement to sell, which includes:
1. Offer: One party proposes the terms of the sale.
2. Acceptance: The other party agrees to the terms.
3. Consideration: Typically involves a monetary payment.

This process ensures the legal transfer of property rights.

Question 12

What are the 2 main types of Conveyance and their specific documents?

Answer 12

Conveyance on Sale of Shares:
- Uses a Share Transfer Form to transfer ownership of shares.

Conveyance on Sale of Property Other Than Shares:
- Land: Transfer involves Property Deeds.
- Goodwill: Utilizes a Contract of Sale for transfer.

Question 13

How is Stamp Duty applied to gifts of property?

Answer 13

Stamp Duty is charged on gifts of property and is calculated based on the market value of the property at the time of the gift.

Question 14

Under what conditions is Stamp Duty charged on the sale of shares?

Answer 14

Stamp Duty is applicable on the sale of shares for:

1. Irish-registered companies.
2. Foreign-registered companies if the company’s value is derived from Irish land and buildings.
3. Foreign-registered companies if the transfer of shares is executed in Ireland.

Question 15

Is Stamp Duty charged on the issue or redemption of shares?

Answer 15

Issue of New Shares: Not liable to Stamp Duty.
Redemption of Shares by a Company: Not liable to Stamp Duty.

Question 16

What are the main exemptions (5) from Stamp Duty?

Answer 16

1. Immovable property situated outside the State
2. Wills
3. Transfer of property between spouses/civil partners
4. Conveyance/lease of land for charitable purposes
5. Intellectual property

Question 17

What are the main reliefs available for Stamp Duty? (3 reliefs)

Answer 17

1. Young Trained Farmer Relief (YTF)
2. Consanguinity Relief
3. Associated Companies Relief

Question 18

What are the benefits and limits of the Young Trained Farmer (YTF) Stamp Duty Relief?

Answer 18

Relief Offered: Full relief from Stamp Duty (0%) on the transfer of an interest in land to a “young trained farmer”.

Aggregate Limit: There is a maximum limit of €70,000 on the total relief claimed under this and other income tax reliefs such as stock relief since 1 July 2014.

Inclusive Property Types: The relief includes the transfer of farmhouses as well as farm buildings.

Question 19

What are the conditions for qualifying for the Young Trained Farmer Stamp Duty Relief? (5 conditions)

Answer 19

Age Requirement: Must be under 35 years old.

Educational Requirement: Must possess a recognized agricultural qualification.

Operational Commitments:
1. Declare to retain ownership and actively farm the land for at least 5 years, dedicating more than 50% of their time to farming.
2. Submit a detailed business plan to Teagasc.
3. Fit within the EU definition of a “small/micro enterprise.”

Question 20

What is the clawback provision and its purpose in the Young Trained Farmer Stamp Duty Relief?

Answer 20

Purpose: To ensure that land granted under this relief remains in agricultural use and is not quickly sold for profit.

Condition: If the land is sold or otherwise disposed of within 5 years of acquisition, the Stamp Duty relief must be repaid. Additionally, it cannot be replaced by other land within twelve months of the date of disposal.

Question 21

What is Consanguinity Relief, and how does it affect Stamp Duty on farmland transfers?

Answer 21

Consanguinity Relief applies to transfers of farmland between ‘close relatives’.

Reduced Rate: The Stamp Duty rate for eligible transfers under this relief is 1%, significantly lower than the standard 7.5% rate for non-residential property.

Applicable Property:
1. Applies to farmland and associated farm buildings.
2. Does not apply to residential farmhouses.

Question 22

What are the conditions required to qualify for Consanguinity Relief on Stamp Duty for farmland transfers? (7 conditions)

Answer 22

1. Transferee/Purchaser Obligations:
   - Must farm the land for at least 6 years, or
   - Lease the land to a farmer for at least 6 years.
2. Farming Requirements:
   - Land must be farmed on a “commercial basis.”
   - Transferee must either spend more than 50% of working time farming or possess an agricultural qualification.
3. Additional Declarations:
   - Declare to retain ownership and farm the land for more than 50% of their working week for 5 years.
   - Submit a business plan to Teagasc.
   - Must qualify under the EU definition of a small/micro enterprise.

There will be a Clawback of the relief if the farm is sold within 6 years.

Question 23

What is Associated Companies Relief and what are its conditions? (4 conditions)

Answer 23

Stamp Duty is reduced to 0% on conveyances or sales/leases between associated companies.

Conditions:
1. Companies must maintain a direct or indirect 90% relationship.
2. This relationship must be retained for at least 2 years following the conveyance.
3. Profit Entitlement: The parent company must be beneficially entitled to not less than 90% of the profits available for distribution among the associated companies.
4. Asset Entitlement on Winding Up: The parent company must also be entitled to not less than 90% of the assets that would be available on the winding up of the subsidiary.

Question 24

What are the Stamp Duty implications when transferring a business?

Answer 24

Contracts for the sale of a business are deemed conveyances on sale and are subject to Stamp Duty.

Deemed Conveyances: Intangible assets such as Goodwill, Debtors, and Cash are considered deemed conveyances and subject to Stamp Duty.

Question 25

Are there any exemptions for Stamp Duty on certain business assets during a business transfer?

Answer 25

If assets within the business, such as land, are already subject to Stamp Duty, there is no additional deemed conveyance for those assets.

Inventory, Plant & Machinery are not considered deemed conveyances and are exempt from Stamp Duty.

Question 26

How does the presence or absence of a contract affect Stamp Duty liabilities during business asset transfers?

Answer 26

With Contract:
- Assets explicitly conveyed in the contract, such as land and buildings, are liable to Stamp Duty.
- Certain intangible assets, like Goodwill and Intellectual Property, are also liable as deemed conveyances on sale.

Without Contract:
- Only inherently stampable assets, such as land and buildings, will be liable to Stamp Duty. Intangible assets are not automatically liable unless specified.