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New approach needed to taxing property

Thursday, June 19 15:21:51

New thinking is needed in the approach to taxing commercial property in Ireland, according to a firm of accountants, tax and business advisors that specialises in the commercial property sector.

Baker Tilly Ryan Glennon said recent years had been ones in terms of property but it now appeared the situation was beginning t improve. And it said more sustainable investment was possible based on the current prices and rents achieved. Buyers spent about E939 million on Irish commercial real estate in the first quarter, almost as much as they paid during the four years through 2012 combined, it said.

"Some new thinking may be required around the tax aspects of holding property. During the years of the property boom investors were not concerned with rent or taxation, as their investment model was based on significant capital appreciation with little thought of annual yield or income generation," according to Aidan Byrne, taxation partner with the firm.

On the taxation front significant gearing and tax breaks often meant that tax was not a factor either.

"However in the new market conditions, yield and keeping tax costs to a minimum are a real factor that needs to be addressed. One clever and often forgotten way of managing the annual tax cost is to claim capital allowances on the plant and machinery imbedded in most properties," said Byrne.

Irish commercial property values fell two-thirds between 2007 and 2012, while yields rose to 7.5 per cent from 3.75 per cent. The lower prices and Ireland's improving economy has encouraged investors including Elena Baturina, one of Russia's richest woman, Donald Trump and now Wilbur Ross to look to Ireland for valuable opportunities.

Baker Tilly Ryan Glennon's tax experts contributed to the Guide to Property for SMEs, which is available at www.bakertillyrg.ie/sectors/commercial- property