This article first appeared in the Spring 2020 edition of The Dublin Solicitors Bar Association 'Parchment' magazine.

Despite the simplification measures introduced back in 2008 VAT on property remains one of the most complex areas of taxation in the State. It can also prove one of the most costly if it is not dealt with correctly.

Whilst we would always recommend that expert advice be sought before finalising property transactions, we have set out below some of the Irish VAT issues which should be considered.

A comprehensive review of VAT on property is beyond the scope of this article, the purpose is rather to provide a few key topical matters that we have seen arise in practice recently.

Old/New Property & Development/Refurbishment

Determining whether a property is old or new is often the first step in ascertaining if it should be subject to VAT.

Property is often referred to as “old” or “new”. This does not necessarily relate to the age of a property as a property could be six years old and considered “old” for VAT purposes but a 100 year old property could be considered “new” for VAT purposes where it has been significantly developed in the five years immediately prior to its sale.

Property is generally considered new when it is:

  • The first supply of a completed property within five years of its completion is subject to VAT (known as the five-year rule).

  • The second and subsequent supply of a completed property within five years of its completion is subject to VAT if it has not been occupied for 24 months in aggregate (known as the two-year rule).

  • Any supply of a developed, but incomplete, property within 20 years of when the development ceased (known as the 20-year rule).

“New” property is automatically subject to VAT (currently at a rate of 13.5%) on sale.

“Old” property is generally VAT exempt, but in certain scenarios, the vendor and purchaser may “jointly opt to tax” the sale. This is usually done to protect a clawback of any VAT recovered by the vendor on acquisition and/or development of the property in the 20 years prior to the sale.

Caution should be taken as other factors could deem property which appears to be “old” to be VATable. For example, a sale, in connection with a contract between the purchaser and another person to develop the property should be subject to VAT.

Another common exception is the sale of residential properties by a developer or builder. In this case the two, five and twenty year rules don’t apply.

TOB Updates

Revenue updated its published, non-statutory, Transfer of Business (“TOB”) guidance both in July 2018 and December 2019. TOB relief no longer applies to the sale of previously let property (the property must either be let or subject to a lease agreement at the time of sale) and the relief should not apply where the sale is to an existing tenant.

The December 2019 updates reflect changes made under Finance Act 2019. Previously, VAT recovery was not available for the vendor where the sale, but for the application of TOB relief, would have been VAT exempt. However, with effect from 22 December 2019, the VAT recoverability on sales related costs for either party should be determined based on general overhead VAT recovery entitlements.

CGS Implications - Connected Party Transfers & Tenants Refurbishment

Under the Capital Goods Scheme (“CGS”), property has a 20 year VAT life. Ordinarily, where a capital good remains in a property and the property is disposed of, a clawback of the VAT reaming should arise for the vendor (unless TOB relief applies to the sale or both parties elect to jointly opt to tax the sale).

Where the sale of property between connected persons is automatically subject to VAT (or would but, for example, TOB relief applies), a clawback of VAT could arise where the amount of VAT which would have been chargeable on the sale is less than the VAT remaining in the capital good of the property. The clawback amount equates to the amount of VAT remaining in the capital good less amount of VAT which would have been chargeable on the sale. Alternatively, a clawback can be avoided where both parties agree in writing that the purchaser will “step into the shoes” of the vendor for CGS purposes.

Refurbishment works carried on by a tenant post 1 July 2008 are subject to CGS rules and a 10 year capital goods life applies. If during this 10 year period the tenant ceases to occupy the property, a VAT adjustment should be required by the tenant. In certain instances, provided the tenant has full VAT recovery entitlement and it is agrees with the landlord, in writing, the landlord could “step into the shoes” of the tenant and acquire the capital good remaining in the property.

Waivers of Exemption

Prior to 1 July 2018, it was possible for a landlord to waive its entitlement to treat short-term lettings (i.e. a lease for a period of less than 10 years) as being VAT exempt. Although, it is no longer possible to get a new a waiver of exemption some legacy issue remain.

Where a waiver of exemption applied to a commercial letting pre 1 July 2008 (or residential leases pre 2 April 2007), the landlord was allowed to keep this waiver, and continue to charge VAT on the lettings (provided the letting was not between connected parties). As such, it is possible that some pre 1 July 2008 lettings of residential property may be subject to VAT even though residential leases are now VAT exempt.

A waiver of exemption currently held by a landlord can be cancelled in one of two ways:

i. The landlord notifies Revenue in writing of its intention to cancel; or

ii. The last property subject to the waiver is sold.

Where a waiver is cancelled, the landlord should remit to Revenue any excess of VAT recovered over VAT paid in respect of the rentals (calculated subject to certain Revenue concessions).

Airbnb lettings

The letting of a room in a hotel or guesthouse or, all or part of residential accommodation that is let on a short term basis (i.e. for a period which does not exceed or is unlikely to exceed eight consecutive weeks) for guest accommodation to a tourist, holiday maker or other visitor, is subject to VAT at a rate of 13.5%. This applies even where rooms in a family home is let via Airbnb.

As such, where turnover from such supplies exceeds or is likely to exceed €37,500 in a 12 month consecutive period, VAT should be charged. Those with Airbnb accommodation should monitor their turnover to ensure VAT is applied correctly.

VAT Groups

Companies closely bound by financial, economic and organisational links may form a VAT group, allowing its members to effectively be treated as one. Within a VAT group, intra-group transactions are effectively ignored for VAT purposes.

However, where immovable property is transferred between VAT group members, such transfers do not benefit from VAT grouping provisions, and general VAT rules should be applied as if the transfer was between independent parties.

Lettings between VAT group members may be disregarded for VAT purposes.


VAT on property continues to evolve and remains an area of complexity. The complications can further increase where a full VAT history is not available or forthcoming. This article is intended to provide a high level overview of some key considerations, but there are often exceptions to the general rules which can impact the VAT treatment that may at first appear black and white.