Pearse Doherty (Donegal, Sinn Fein)
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94. To ask the Minister for Finance the rationale for changes to the personal retirement savings accounts in the Finance Bill; the estimated savings to the Exchequer from the proposed changes; when the Tax Consolidation Act 1997 was last amended to change the treatment of PRSAs and PEPPs; the rationale for those changes; and if he will make a statement on the matter. [42092/24]

Jack Chambers (Dublin West, Fianna Fail)
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I am advised by Revenue that, prior to 1 January 2023, where the combined contributions by an employer and an employee to the employee’s Personal Retirement Savings Account (PRSA) did not exceed the employee’s annual percentage limit (between 15% and 40% of “net relevant earnings”, varying depending on age, up to a maximum relieved salary of €115,000) the contributions were relieved from tax. However, where the combined contributions exceeded the applicable threshold, the amount above the threshold was treated as a taxable benefit in kind (BIK) in the hands of the employee.

Section 22 Finance Act 2022 removed the difference in treatment between PRSAs and occupational pension schemes. The amendment abolished the BIK charge on employer contributions to an employee’s PRSA. In addition, employer contributions to an employee’s PRSA are not counted towards an employee’s age and salary related percentage limits on tax deductible contributions. These changes were recommended by the Interdepartmental Pension Reform and Taxation Group (IDPRTG) with a view to improving and simplifying the pension landscape in Ireland. The report made the following recommendation to address the differences in tax treatment for occupational pension schemes and PRSAs: “The differential treatment of PRSAs for funding purposes should be abolished and employer contributions to PRSAs should not be subject to BIK”.

As with any change in tax policy, Revenue has actively monitored developments since the introduction of these changes in Finance Act 2022. The examination of employer contributions to PRSAs in 2023 identified a small number of cases that give rise to concerns. Revenue data shows that in these cases, the employer contributions to PRSAs were significantly higher that the salary associated with the employment and, in most of these cases, the employee for whom the contribution was made had a connection to the employer (for example, the company owner or a family member of the owner). Following consideration of the data, it would appear these cases are giving rise to behaviour that is not in keeping with the policy intention of the changes.

Section 12 Finance Bill 2024 aims to address these concerns. If enacted by the Oireachtas, the measure will provide for an “employer limit” on employer PRSA contributions of 100% of the relevant employee’s salary. Any contributions above the “employer limit” will be considered a BIK for the employee and therefore subject to tax. Where an employee’s salary in a particular year is lower than in the previous year because of unpaid leave such as maternity leave, parental leave or extended sick leave, the limit will be 100% of the employee’s emoluments for the previous year of assessment. In addition, an employer will only be able to take a deduction for Corporation Tax purposes for PRSA contributions for an employee up to the “employer limit”.

The changes outlined for PRSAs will also apply to employer contributions to Pan-European Personal Pension Products (PEPPs).

I am advised by Revenue that, due to the difficulty in predicting the behavioural responses to the policy change, it is not possible to robustly estimate the potential yield to the Exchequer.

Pearse Doherty (Donegal, Sinn Fein)
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95. To ask the Minister for Finance the rationale for not applying the 6% stamp duty rate on residential to purchases of three or more apartments in the same block in the Finance Bill; and if he will make a statement on the matter. [42093/24]

Jack Chambers (Dublin West, Fianna Fail)
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Section 90 of Finance Bill 2024, as published, amends Schedule 1 to the Stamp Duties Consolidation Act 1999. It gives effect to a Financial Resolution passed by the Dáil on Budget night to increase the standard rates of Stamp Duty payable on transfers of residential property and the higher rate of Stamp Duty payable on bulk acquisitions of houses.

In respect of the first of those, prior to the passing of the Financial Resolution, the standard rates of Stamp Duty applying on transfers of residential property were 1 per cent on the consideration up to €1 million and 2 per cent on the balance. The Financial Resolution, which this amendment gives effect to, introduced a third rate of 6 per cent, which applies where the consideration exceeds €1.5 million.

Implementing the new 6 per cent rate is primarily a revenue raising measure. However, I was also conscious when making this decision that residential property prices have increased significantly since the rates were last changed in 2010. It seems both logical and fair that higher value homes should be subject to a higher Stamp Duty rate, if only to help generate additional revenue for the State. Stamp Duty on property should have an element of progressivity built into it.

The new 6 per cent rate will be disapplied where three or more apartments in the same block of apartments are being acquired in an aggregated fashion, that is at one overall price using the same instrument of transfer. In such cases, the rates that will apply are 1 per cent on the amount or value of the first €1,000,000 of the consideration and 2 per cent on the balance.

The policy intention of the 6 per cent rate is to apply to the purchase of individual high value properties. It is intended as both an equity and revenue raising measure.

Where an acquisition of 3 or more apartments is made in a disaggregated fashion, the new 6 per cent Stamp Duty rate will apply to any value of each apartment that exceeds €1.5 million.

The acquisition of blocks of apartments by investment funds with the intention of placing them on the rental market remains a significant source of such apartments, and therefore continues to play an important role in overall housing supply.

Following the introduction of the new 6 per cent Stamp Duty rate, aggregated purchases of multiple apartments in the same transaction could potentially have triggered the new higher rate, and possibly for a significant portion of the overall value.

It is not the policy intention of this measure to make the development of apartments economically unviable. Apartments, including privately owned rental apartments, have an important role in the Government’s overall housing strategy.

Apartment development is cost intensive. It is generally not considered economically viable for developers to progress high-density apartment development, or for lenders to deploy capital (equity and debt) to such schemes, without either a forward committed purchase or forward funding arrangement in place prior to commencement. Such an arrangement is usually put in place with an institutional investor with sufficient balance sheet capacity.

Following the passage of the Financial Resolution, from midnight on 1 October the revised rates of Stamp Duty apply to any deed of conveyance or transfer or long lease of residential property that is executed after that date. Transitional arrangements apply where there is a binding contract that was in place on or before that date, and the deed or lease is executed before 1 January 2025. In such circumstances, the purchaser can benefit from the rates that previously applied.