Dáil Éireann Debate, Tuesday - 7 December 2004
158 Mr. Kenny asked the Minister for Finance the amount of tax taken on the purchase of a house valued at €250,000; the breakdown of the amount by type of tax levied; and if he will make a statement on the matter. [32054/04]
Amharc ar fhreagraThe taxes directly relevant to the purchaser of such a house are stamp duty and VAT. The circumstances under which a purchaser may or may not be liable for those taxes would depend on whether they are a first-time buyer, an owner occupier other than a first time buyer or an investor. The seller of the house may be liable to income tax, corporation tax or capital gains tax, depending on whether it is a new or second-hand house. The details are set out as follows.
The stamp duty chargeable on a house costing €250,000 depends on three main factors: whether the purchaser is a first-time buyer, owner-occupier or investor; whether the house is new or second-hand; if the house is new, whether the total floor area is less than or greater than 125 sq.m.
For any legal instruments executed on or after 2 December 2004, a first-time buyer, who is an owner-occupier, will pay no stamp duty on the purchase of a new or a second-hand house worth €250,000. An owner-occupier who is not a first-time buyer will pay no stamp duty on a new house costing €250,000 unless the floor area exceeds 125 sq.m. and the site value is in excess of €127,000, but if the house is second-hand, she or he will pay €10,000. An investor will pay €10,000 in stamp duty on a new or a second-hand house costing €250,000.
The rate of VAT on the sale of a new house is 13.5%, so the VAT inclusive price of €250,000 will include VAT of €29,735. In general VAT is not chargeable on the sale of second-hand houses.
A builder who is a sole trader would be chargeable to income tax on the taxable profit on the sale of a new house at the 20/42% rates, as applicable. If the builder were a company the rate of corporation tax on the taxable profit would be 12.5%. If the seller is not trading he would make a disposal for purposes of capital gains tax and the tax is 20% of any chargeable gain in the case of an investor. A seller of a house, which has been his only or main residence throughout his period of ownership, would have no CGT liability on such a disposal.
The Deputy may also wish to note that I dealt with the issue of the tax take from the price of a new house in a reply to a parliamentary question on 23 November 2004. Figures in excess of 40% have been attributed by the house building industry to the amount that the Government raises in tax from each new home. However, this figure is wrong. Based on the same industry figures, the cost of a new home that accrues directly to the Exchequer through taxation is more like 28%, based on both Dublin and national prices. This includes not just the taxes mentioned above, where applicable, but also the PAYE and PRSI on the wages of those who built the house. In this light, the tax take is not exceptional and is broadly in line with the tax take on the overall economy.
