Ireland has a reputation for being a low-tax economy. So it might surprise a lot of people to learn that, when it comes to Capital Gains Tax (CGT), Ireland has the fifth highest rate in Europe, as far as base rates go.
There’s a little more to it than that, however. CGT is a far-reaching form of taxation. It is payable on profits made from disposing of many kinds of asset. Property, land, company shares, moveable goods, intangible assets like patents and copyrights – all of these are subject to CGT. And it’s not just a case of when assets are sold. CGT comes into play when assets are gifted or exchanged, too.
The standard rate of CGT in Ireland is 33%. This goes up to 40% for any gains made from foreign investment products and life policies. And is reduced to 15% for gains arising from venture fund investments (12.5% if the investment is made through a company).
But the full rate is rarely paid on the full value of any gain you make. For one, you can deduct allowable expenses from the profits you make, such as money spent on adding value to an asset (such as renovating a property, for example), or any costs incurred in the acquisition and disposal (e.g. solicitor’s fees).
On top of expense deductions, there is also a long list of exemptions and reliefs which further reduce CGT liabilities. Here are some of the main ones you should know about.
Personal exemption
Individuals can accrue €1,270 in capital gains per tax year before becoming liable for CGT. This is a non-transferable allowance and applies to personal gains only, not companies.
Spouse & civil partner exemption
Gifts and exchanges of assets between spouses and civil partners are completely exempt from CGT. This does not extend to former spouses and also does not cover disposal of trading stock in businesses.
Asset exemptions
The list of assets exempt from CGT includes most prizes, government stocks, some life insurance payouts, animals, private cars and what is classified as ‘movable property’ (think day-to-day household items) so long as the profit you make on it is no more than €2,540.
Principal private residence (PPR) relief
While disposals of property are a common reason for incurring a CGT bill, it doesn’t apply to gains made on your principal place of residence. Under the terms of PPR Relief, any gains you make when you sell your main home are exempt from CGT.
Indexation relief
Indexation relief uprates historic deductible expenses to take account of inflation. It only applies to expenses incurred before 2003. A common example of where indexation relief is used is in property sales, where the profits made on property bought more than 20 years ago are often significant because of the effects of inflation.
Revised entrepreneur relief
Personal gains made by business owners from the disposal of certain business assets are subject to CGT at a reduced rate of 10%. Revised Entrepreneur Relief applies to shares held in a trading company, or in the case of sole traders, any assets used in the continuation of the business.
To claim the relief, the person disposing of the assets must have owned them for at least three years. If the business is operated by a company, an individual must own at least 5% of the ordinary shares to qualify.
Speak to an expert
Talk to our Capital Gains Tax specialists today to find out more about CGT liabilities and the reliefs that may be available to you.
