TENANTS IN PRIVATE rental accommodation who pay more than €2,500 a month in rent have been warned that they are liable to pay stamp duty.
Stamp duty is the fee payable on the instruments used to transfer property.
Typically, it is known as the fee you have to pay to Revenue when purchasing a new home.
However, stamp duty is also payable on private leases when the rent paid to a landlord is above €30,000 per year (€2,500 a month).
The cost of renting has skyrocketed in recent years as housing supply fails to keep pace with demand. The problem is at its most acute in Dublin and other areas, where rents are now higher than their peak Celtic Tiger levels.
In a four-bedroom shared house where the tenants are on a shared lease and paying €650 each per month in rent, the total rent paid a year would be €31,200 and those tenants would then be liable to pay stamp duty.
The rate of stamp duty payable is 1% of the total rent. So in the case above it would be €312 a year.
It is the tenants themselves who are liable to pay this money directly to Revenue. They must file a stamp duty return and pay the related amount.
Social Democrats TD Catherine Murphy recently submitted a Parliamentary Question to Finance Minister Paschal Donohoe enquiring how many residential leases were liable for stamp duty and how much money that stamp duty yielded over the past five years.
The figures released showed a steady rise over the past four years (there was no data available for 2012 or before) in the number of leases subject to stamp duty and the money yielded from it.
In 2016, there were 238 short-term residential leases (leases for 100 years or less) that were subject to stamp duty. In total, the stamp duty yielded from these leases amounted to €150,000.
This figure has tripled in just three years. In 2013, there were 80 leases subject to stamp duty with €50,000 yielded.
Warning
Catherine Murphy called for exemptions to be introduced for tenants who are sharing rental costs or for the threshold that stamp duty is payable at to be raised.
“Because rents are so high, more and more students and young professionals feel they have no choice but to share houses with their friends so they can pool their rent,” said Murphy.
These are exactly the kinds of tenants that these stamp duty rates affect.
Murphy also said that there was not enough awareness among private renters that they may be liable to pay stamp duty and as a result them may be unwittingly breaking the law.
“I am sure that a lot of tenants living in shared accommodation, like students or young professionals, don’t even know that they are legally required to pay stamp duty on top of their rent,” she said.
They may find themselves in breach of the law without even realising it.
Diarmaid O’Sullivan, services manager with housing support charity Threshold, said his group had not encountered people having issues with stamp duty, but that as rents continued to rise it could become a more prominent issue.
The fact that we are getting in the situation where rents are going over €30,000, that was not anticipated when the current rules in relation to stamp duty were drawn up,” he said.
It may be a case where those caps may need to be revisited.
A spokesperson for the Residential Tenancies Board said that due to rising rents, a number of tenant will find themselves having to pay stamp duty.
“Due to the changing nature of the rental market, and the rising cost of rent, particularly in some areas of Dublin, there are a cohort of tenants who will be required to pay stamp duty on their rental property,” a spokesperson said.
When questioned about people potentially not being aware that they are libale to pay stamp duty, a spokesperson for Revenue said it was “committed to providing taxpayers with easy access to clear and timely information”.
“Our aim is to make it easier for customers to understand their entitlements and meet their tax and duty obligations,” they said.
To this end, Revenue recently redesigned our website.
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