Written answers

Tuesday, 10 February 2009

9:00 pm

Photo of Paul KehoePaul Kehoe (Wexford, Fine Gael)
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Question 245: To ask the Minister for Finance if he will make a statement in respect of the VAT position and the stamp duty position on transactions (details supplied). [4767/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I am informed by the Revenue Commissioners that the position in relation to the transactions concerned is as follows. With regard to VAT, the renting of residential property is exempt from VAT. Before 1 July 2008, where a developer let a residential property, this would have resulted in a full claw-back of all the VAT incurred on the construction of that property, which had been reclaimed by the developer.

Since 1 July 2008 there is a special rule for property developers who construct a residential property for sale but subsequently rent that property. In such circumstances, rather than suffering the negative cash flow effect of a full claw-back of VAT deducted in respect of the development costs, the developer is obliged to pay back to Revenue 1/20th of the VAT deducted at the end of each year that the property is rented. When the property is eventually sold VAT is chargeable on the sale price at the reduced rate of VAT, currently 13.5%. In most cases, if the sale price is reduced by the amount of rent paid, VAT will be chargeable on the reduced amount. This is provided that the rent paid during the rental period is a bona fide market rent. If a premium were paid above the market rent, that premium would be treated as an option payment relating to the sale of the property and would, therefore, be liable to VAT at 13.5%.

In relation to stamp duty, the purchase of a new house or apartment with a floor area not exceeding 125 square metres is exempt from stamp duty where the house or apartment is occupied as the main residence of the purchaser for a period of two years from the date of the purchase. There is also a relief from stamp duty in the case of the purchase of a new house or apartment where the floor area exceeds 125 square metres and the house or apartment is occupied as the main residence of the purchaser for a period of two years from the date of the purchase. Under this relief the stamp duty is charged on the site value or one quarter of the total value of the property whichever is the greater. Where an intended purchaser occupies a newly built house under "a rent to purchase scheme" and the house is subsequently purchased by that person as part of the scheme, the property is regarded as new for the purposes of the stamp duty reliefs described above.

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