Land Leasing Ireland
Medium and long term leasing arrangements offer many advantages
- Long term leasing is very tax efficient; landowners can lease out their land to an unconnected person for a period of ten years and qualify for an income tax exemption on the rental income of up to €20,000 per annum.
- The land owner can still qualify for CGT relief on any subsequent transferring.
- The land owner can retain some land for his/her own farming.
- The tenant has time and security to maximize returns from the land and implement improvements
Limitations of long term leases include
- Rental income tax relief is not available within the family or to a company, even as part of a succession arrangement.
- Stock disposals prior to leasing can have tax implications.
- A tenant’s ability to finance improvements or expansion may be limited.
Long term leasing (minimum 5 years and ideally longer) is effective land use collaboration. It is very tax efficient for the land owner.
The thresholds for Income Tax exemption for leases taken out on or after 1 January 2015 are
- €18,000 where all the qualifying leases are for 5 or 6 years,
- €22,500 where all the qualifying leases are for 7 but less than 10 years,
- €30,000 where all the qualifying leases are for 10 but less than 15 years,
- €40,000 where all the qualifying leases are for 15 years or more. Leases also give certainty and security to both parties. The tenant can take a long term view on the land use to deliver best return and enhance the land.