How does VAT on property work in Ireland — residential vs commercial?

VAT on property in Ireland depends on whether the property is residential or commercial and whether it is new or second-hand. The rules are complex and differ from most other VAT transactions.

Residential property:

• New residential property (first sale by a developer) is subject to VAT at 13.5% on the sale price. The developer charges and accounts for the VAT, and it is included in the purchase price you see quoted.
• Second-hand residential property (subsequent resales by private owners or non-taxable persons) is generally VAT-exempt. There is no VAT on the purchase of a used home.

Commercial property:

• New commercial property (office, retail, industrial) is subject to VAT at 23% on the first sale or long lease. Sellers must charge VAT unless the parties jointly opt out.
• Old commercial property (over 5 years from completion) is generally VAT-exempt on sale, but both buyer and seller can jointly opt to tax the sale, which is often done when the buyer is VAT-registered and wants to recover input VAT.
• Short-term lettings (under 10 years, e.g., monthly commercial leases) are generally VAT-exempt, unless the landlord opts to charge VAT.

The Capital Goods Scheme (CGS):

For VAT-registered property owners (mainly commercial landlords), the CGS requires them to account for VAT if the use of the property changes within a 20-year adjustment period. For example, if a commercial landlord who claimed VAT back on a purchase converts the property to residential use, a VAT clawback can apply.

Residential rental: Letting a residential property is always VAT-exempt — landlords cannot charge VAT on residential rent, and consequently cannot recover input VAT on related costs.