Stamp duty has been a significant focus of Ireland's Budget 2018. The rate of stamp duty on Irish commercial property was increased from 2% to 6%. The increase did not initially apply to indirect transfers of land, such as transfers of shares in property holding companies. However, the Seanad (the Irish Upper Chamber of Parliament) has approved legislation to target such transfers.

This would, if enacted in its current form, apply the 6% rate to certain transfers of shares or securities in companies, Irish real estate funds (IREFs) or partnerships.

Based on the draft legislation, a transfer of shares or interests will be subject to 6% stamp duty where the following three conditions are satisfied:

1. The company, IREF or partnership derives over 50% of its value from Irish commercial property or development land;

2. The transfer, or connected transactions, results in a change in control of the land; and

3. The land has been developed or is intended for development.

The intention of the change is clearly to target indirect transfers of property and seek to apply the new 6% rate.

It is understood that where the land is residential development land, the stamp duty refund scheme provided for in Budget 2018 will be available.

The change applies Irish stamp duty to transfers of non-Irish entities, as well as to certain funds which have Irish development land. As the change is restricted to cases involving land which has been, or will be developed, investors who hold assets such as long-leased properties through corporate or intermediate entities may not be negatively impacted.

Those involved in transactions involving Irish property holding companies should take advice on the points raised as it may be an additional unexpected cost for some purchasers.