The commercial stamp duty rate has been increased from 2% to 6% in Budget 2018.

Minister for Finance Paschal Donohoe said the new rate for non-residential property sales will "get the commercial property market moving again". 

The new rate is below the maximum rate of 9% charged between 2002 and 2008.

The rate had been cut to 2% in 2011 to get the commercial property market "moving again".

"It worked and now that the market is performing strongly, the time is right to focus resources elsewhere," the Minister said.

The increase comes into effect from midnight. 

However, in relation to commercial land purchased for the development of housing, a stamp duty refund scheme will be introduced to address the housing supply challenge.

The refund will be subject to certain conditions, including a requirement that developers will have to commence the relevant development within 30 months of the land purchase.

Reaction to Budget 2018

Commercial property consultants CBRE Ireland said the decision to increase the rate of stamp duty on commercial property deals was not a welcome move. 

CBRE said the increase from 2% to 6% - from midnight - will have a direct impact on pension funds and the many institutional buyers who have been key to the recovery of the sector over recent years.

Marie Hunt, Executive Director & Head of Research at CBRE Ireland, said that one of the welcome developments over the last number of years was that the Irish commercial real estate market had become professionalised.

Ms Hunt said that more than half of all investment now emanates from overseas investors and institutional buyers as opposed to being a domestic debt-funded market as we had when the market crashed previously. 

"Unexpectedly trebling transaction costs in this manner is clearly unwelcome considering the reputational damage it will do with these institutional investors," she added. 

Dr John McCartney, Director of Research at Savills Ireland, said that today's commercial stamp duty increase will hit 550,000 private sector pensions.

He also said that he believes the Government has overestimated the potential tax take from today's increase. 

Dr McCartney said the industry has already moved into a more normalised environment of lower trading activity. 

"To illustrate this, last year €4.5 billion of commercial property assets were traded. The likely turnover for 2017 will be €2.25 billion," he added.