IRELAND Law and Practice Contributed by: Diarmuid Mawe, Craig Kenny, Katelin Toomey and William Fogarty, Maples Group
8. Tax 8.1 VAT and Sales Tax
ed damages if the contractor does not reach completion by the agreed date. The liquidated damages must be based on a pre-genuine esti - mate of the losses to be incurred by the client if the works do not complete on time and can be capped at a percentage of the contract value. In the event of delay due to the default of the contractor, the client is entitled to set off the liq - uidated damages against payments due to the contractor. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance It is normal for a client to seek the provision of a performance bond from the contractor as a form of security for the proper performance of the works, and this would typically be in addition to the retention by the client of a set percentage (normally 5%) of the payments to the contractor during the construction of the works. Depend - ing on the financial robustness of the contrac - tor, a parent company guarantee may also be required. 7.6 Liens or Encumbrances in the Event of Non-payment The creation of liens and encumbrances is not common. It is noteworthy, however, that under the Construction Contracts Act 2013, contrac - tors and subcontractors have a statutory right to suspend their works or refer a payment dispute to statutory adjudication in the event of non- payment of a due amount. 7.7 Requirements Before Use or Inhabitation Under the Building Regulations, a building can - not be occupied or used until prescribed compli - ance documentation has been submitted to the relevant building control authority and entered onto the relevant statutory register.
Sales of commercial property can be divided into two categories: sales of new property, and sales of old property. In relation to new buildings, VAT must be charged at the rate of 13.5%. A property is considered “new” where it has been developed in the previous 20 years, or where buildings on it have been developed or redeveloped in the previous five years. The first sale of residential property by the person who developed the property is always subject to VAT. Sales of old property are exempt from VAT. In a VAT-exempt sale of property, to avoid a claw - back of VAT that the seller may have previously recovered, the seller and buyer may agree to make an exempt sale VAT-able and jointly opt to tax the sale of the property. Exemptions Transfer of Business applies to the sale of a property that has been let in the past, on the basis that the buyer intends to carry on the same sort of business as the seller (ie, letting the prop - erty), and will only apply provided the sale is to a person who is accountable for VAT purposes (ie, a person who is obliged to register and account for VAT). Where the transfer of business relief applies to the sale of an “old” property, no VAT adjustment (known as a Capital Goods Scheme Adjustment) should arise for the seller, and the buyer will take over the property’s obligations from the seller under the capital goods scheme.
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