Real Estate and Housing

Update on key measures

1. VAT on supply of apartments – Rate reduction from 13.5% to 9% 
   
   No further change has been made to the financial resolution announced on ‘Budget Day’.  
   
   
2. Apartment development – New enhanced corporation tax deduction (€50,000 per unit) 
   
   Eligible expenditure includes costs incurred on the construction of qualifying apartment blocks for sale, excluding financing, insurance, professional and legal fees, sales and marketing costs, taxes, land acquisition, and certain other charges or contributions. 
   
   To qualify, the claimant must be a company carrying on a relevant property development trade and be the beneficial owner of the completed development on the date compliance certificates are lodged. The relief can be claimed in the year the completion certificates are lodged, provided the commencement notice is issued between 8 October 2025 and 31 December 2030. Full eligibility conditions are complex and should be carefully reviewed by those intending to avail of this relief. 
   
   
3. Rental profits arising from cost rental activities – Corporation tax exemption  
   
   A corporation tax exemption applies to cost rental dwellings first designated by the Minister on or after 8 October 2025. Despite the exemption, landlords must continue to report certain administrative details, including the number of units and profits that would have been taxable if the exemption did not apply. Provisions are also included for cases where cost rental status is revoked.  
   
   
4. Residential Zoned Land Tax (“RZLT”) – Further rezoning opportunity 
   
   A further rezoning opportunity for 2026 has been introduced, potentially leading to an exemption for landowners currently in scope of RZLT for that year. 
   
   A significant new exemption replaces the previous deferral where development cannot commence due to planning permission being subject to appeal by an unconnected third party. This exemption applies from the grant of the planning permission under appeal and continues for the duration of the appeal, regardless of the outcome. 
   
   
5. Living City Initiative (“LCI”) – Expansion of the existing scheme 
   
   The commercial premises and rented residential elements of the LCI are amended to provide that:  
   
   - Relief for qualifying expenditure incurred on or after 1 January 2026 is allowed over two years at a rate of 50 per cent per annum (previously 15% per year over 7 years). 
   - The period unused relief may be carried forward is extended to 10 years (previously 7 years). 
   - The restriction which requires three times the amount of a grant received or receivable to be deducted from qualifying or eligible expenditure is removed.  
   - The restriction on property developers or connected parties claiming relief in certain circumstances is removed. 
   - The relief cap has also been increased from €200,000 to €300,000. 
   
   
6. Other 
   
   The following measures are in line with those announced on ‘Budget Day’: 
   
   - Extension of time limits applicable to the residential stamp duty refund scheme.  
   - No changes to the Irish Real Estate Fund or Real Estate Investment Trust regimes. 
   - Extension of the Rent Tax Credit by three years, now running until the end of 2028. 
   - Retrofitting relief for small landlords is extended to the end of 2028, with claims now allowed in the year expenditure is incurred and applicable to 3 properties instead of 2. 

Our view 

While no changes were announced to the VAT reduction on apartments today, it is hoped that prior to the finalisation of the Bill the provisions will be amended to apply the reduction to construction costs. This is necessary to ensure the measure applies as intended.  

The requirement for the claimant of the enhanced corporation tax relief on apartment construction to be the beneficial owner of such apartments on completion could also unintentionally give rise to many schemes missing out. We recommend prior to finalisation of the Bill that this technicality is addressed to ensure the relief captures common apartment delivery methods such as forward fund transactions. 

The ongoing application of RZLT in forward fund situations, where a tax deferral has previously been granted, will regrettably continue to result in adding costs to existing developments. We strongly urge the introduction of transitional provisions in the finalisation of the Bill to mitigate inflationary pressure arising from RZLT. That said, the new exemption during third-party appeal periods represents a positive and welcome development. 

The enhanced form of LCI provided for today is also a positive development. Nonetheless, EU State Aid constraints mean the relief is capped at a lower level than some market participants will have hoped for. 

To fully capitalise on the momentum generated by Budget 2026, it is important that implementation issues relating to the VAT apartment reduction and the enhanced corporation tax relief for apartment construction are resolved. This will ensure these measures function as the activation tools they were designed to be. 

Link to previous Budget 2026 commentary: Budget 2026: Real Estate and Housing