Getting VAT Back When Buying New Homes To Let

EVENING HERALD Thursday , 14 July 2005

If you're fortunate enough to be in the position to be able to invest in a second property in this country or are considering it, then you'll be very interested in this method of easing your cash-flow.

Buying new property for letting is an easier investment if you use VAT refunds available to investors - to the tune of almost 12pc of the purchase price. For example, on a new home costing €300,000, you would get €35,683 back from the Revenue directly to your bank account as a VAT refund. on top of this substantial sum, you also can claim about €2,500 depending on the sum, you also can claim about €2,500 depending on the amount spent by way of a 21pc VAT refund on your legal fees and fit-out costs.

Don't forget, however, that you must repay the VAT if you sell the property, if you hold on to it, the VAT is clawed back slowly by the tax man by treating the rent income you receive as including VAT - which is then passed back to Revenue at year's end.

Thanks to Alan Dukes, Minister for Finance in the 1980s, VAT has been charged on all new homes in the Republic of Ireland, though it is not advertised. The VAT rate at present is 13.5pc and it is included in the price you see quoted on a property when you go to view it.

If you claim back the VAT charged by the builder (and fit-out/ legal fees, etc.) the cost up-front for buying is thus considerably reduced.

The criteria to qualify for this scheme are:

- The house/apartment being purchased must be new
- You must register for this scheme before the sale is closed on the property you want to buy
- The property must be bought in the Irish Republic you can use a financial consultant to register for the scheme. they then guide you through the completion of convenience. the reclaim is made by the consultant and is followed up until the refund is lodged into your bank account.

What are the benefits to the investor?

- Your cash flow requirements for the investment are reduced substantially
- You achieve interest and tax savings of €35,000 (estimated) on €300,000 property
- You end up paying less stamp duty is calculated on the pre-VAT value of a new home and not on the purchase price. Remember... "You can't Tax a tax!"

Although you must repay the VAT lump sum, effectively you're getting a loan interest-free from the Revenue, which is repaid over the medium term as the rent is received and tax declared.

This is not a tax-incentive scheme and as a result you get to pick the location and properties that are not overpriced, unlike many other tax-incentive properties. help with this scheme - the fee is €1,500, plus VAT.

For more details on this scheme contact Fergal O'Gara of LowEq on 4049391 or visit www.loweq.com

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