Mansion Global

Will Property Taxes Change Soon in Ireland?

Some already have, to the homeowners’ benefit.

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omersukrugoksu / Getty Images
omersukrugoksu / Getty Images

Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.

Q: I am a U.K. resident thinking about buying a second home in Dublin, but I’ve heard property taxes might be raised there. How likely is it the rate will change?

"Ireland has come under significant pressure from the European Union in recent times to increase its property taxes, [but] any proposal to increase such taxes is likely to be met with political reluctance," said Clare McGuinness, Tax Practice partner at the Dublin law firm of Ronan Daly Jermyn.

"The reality is that tax rates are unlikely to increase significantly, if at all," said Gavin McGuire, consultant and head of tax at Philip Lee law firm in Dublin.

More:Do Home Ownership Changes in the U.S. Trigger a Property Tax Reassessment?

When introduced in 2013, Local Property Taxes were politically controversial, he said. At the time most people whose incomes hadn’t increased were being taxed on "a fixed, often non-income-producing asset," Mr. McGuire said. So it’s unlikely local property taxes will increase soon. "Indeed, there is every possibility the rates will reduce," he said.

Legislation that went into effect in July, 2013 allows local authorities to review property tax rates and increase or reduce them by as much as 15%. For 2017, five of 31 local authorities will reduce rates and three will increase rates. In 2016, 11 local authorities lowered rates. "It depends on each authority’s needs and effectively can vary by authority for different years," he said.

The Irish government also has suspended property tax revaluations until 2019, effectively freezing local property tax levels, Ms. McGuinness said. The European Commission has strongly criticized this decision, stating that it "represents a lost opportunity to broaden the tax base as residential property prices have increased."

Local Property Tax is an annual charge that applies to most Irish residences and is based on the property’s market value on a specific valuation date (currently May 1, 2013), Ms. McGuinness said. Properties worth more than €1 million are assessed at 0.18% on the first €1 million and 0.25% on the portion above €1 million, she said, subject to any local adjustments. New homes bought between Jan. 1, 2013 and Oct. 31, 2019 are exempt from property tax until the end of 2019, she said. This exemption also applies to previously owned homes purchased in 2013, provided the property is occupied as your main residence.

More:How Can I Tell if My Property Tax Bill in Greenwich, Connecticut, Is Correct?

Local property taxes, paid during ownership, are one of three main taxes Irish homeowners pay. The other two are stamp duty when the home is purchased and capital gains tax after the home is sold.

Stamp Duty

Stamp duty rates are 1% of the value of the property up to €1 million (US$1.156 million) and 2% on the value of the property in excess of €1 million, Ms. McGuinness said.

The rate is a dramatic drop from a high of 9% in 2007. It was changed a few years later to help stimulate the property market, which had "little to no transactions in 2010" during the financial crisis, Mr. McGuire said.

No further drop is expected, Ms. McGuinness said.

More:Click to Read Tax Experts Share Answers and Advice for Readers’ Pressing Tax Questions

Capital Gains Tax

Since Dec. 6, 2012, the current rate of capital gains taxes in Ireland has been 33% of any profit gained from the sale or transfer of the home. This rate is the highest it has been in 15 years, Mr. McGuire said, and "any change in the tax rate is likely to be downwards."

Politicians have recently called for a reduction in the capital gains tax rate. They believe this would encourage home sales, particularly those that are vacant, to ease the housing crisis in parts of Ireland, Ms. McGuinness said. "Whether this will result in any change remains to be seen."  

Email your questions to editors@mansionglobal.com. Check for answers weekly at www.mansionglobal.com.

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