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Capital Gains

 

 

Services > Taxation > Capital Gains

 

 

A capital gains tax is chargeable on the gains arising from the disposals of assets. Any form of property (other than Irish currency) including an interest in property (as, for example, a lease) is an asset for capital gains tax.

Disposal of assets

Disposal of an asset includes

  • A transfer by sale, exchange, or gift,
  • the settlement of an asset on trustees, or
  • the receipt of a capital sum derived from assets such as compensation or insurance money in respect of the loss or destruction of an asset or for forfeiture or surrender of rights.

However, the death of an owner of assets is not an occasion of charge in respect of those assets. Where a disposal is made other than by way of an arm's length sale between connected parties, the consideration is deemed to be equal to the market value of the asset at the date of disposal.

Persons chargeable and the extent of the charge

All persons who are resident or ordinarily resident in the State for a year of assessment are liable to the tax in respect of chargeable gains accruing in that year on the disposal of assets, wherever the assets are situated. The charge extends to individuals, companies, trustees and other bodies of persons.

Individuals resident or ordinarily resident, but not domiciled, in the State are chargeable to tax on gains on the disposal of chargeable assets located outside the State, only to the extent that such gains are remitted to this country.

Non-resident persons are chargeable to tax on gains made on the disposal of specified assets including:

  • immovable property situated in the State, minerals or mineral rights in the State (including the Irish area of the Continental Shelf), 
  • shares in a company derviving the greater part (>50%) of its value from such property or mineral rights, 
  • on the disposal of assets used for the purposes of a trade carried on in the State through a branch or agency.

Basis of tax charge and payment of tax

The tax is charged based on each tax year (i.e. 1st January to 31st December). Tax on gains made in January to November is payable by 15 December in the same tax year. Tax on gains made in December is payable by 31 January in the next tax year. A return must be made by 31 October of the following year.

Calculation of gain

The taxable gain is the amount of the consideration as reduced by "deductible expenditure", that is, the cost of acquisition and certain enhancement expenditure. Deductible expenditure is also adjusted for inflation (indexation relief). This adjustment is not made in respect of any expenditure incurred within one year of the date of disposal of the asset. Indexation relief is available to all taxpayers, including companies and non-residents.

In the case of development land, indexation relief applies only to the current use value (i.e. value without permission to develop or change its use) at the date of acquisition (or 6 April 1974, if later).

Irish Capital Gains Tax Rates

The CGT rate is currently 25% (since 8/4/09). It was 22% from 15/10/08 to 7/4/09 and 20% prior to 15/10/08.

CGT Exemptions and reliefs

Various exemptions and reliefs from capital gains tax are provided, the most important being the following:

1. The first Euro1,270 of taxable gains by an individual in a tax year are exempt. In the case of a married couple this exemption is available to each spouse but is not transferable.

2. Gains realised on the following are not taxable gains:

(i) Irish government securities, including land bonds, prize bonds, savings certificates and bonuses payable under the National Instalment Savings Scheme;

(ii) securities of local authorities, certain State-sponsored bodies and the European Union;

(iii) futures contracts based on government and other securities that are not chargeable assets for the purposes of capital gains tax;

(iv) life assurance policies and contracts for deferred annuities, unless purchased from another person etc.

(v) movable non-wasting assets sold for Euro2,540 or less;

(vi) wasting chattels, such as private motor cars, animals;

(vii) winnings from betting, lotteries and sweepstakes;

(viii) gains accruing to superannuation funds, charities and certain bodies, such as local authorities and trade unions;

(ix) certain works of art valued at not less than Euro31,740 where they have been loaned to an approved gallery for a period of not less than six years for display to the public;

(x) a gain on a dwelling-house (including grounds of up to one acre) where the house has been used as an individual's only or main residence (or, under certain conditions, as the sole residence of a dependent relative) during the individual's period of ownership. In certain circumstances there may be a restriction on the relief or partial relief may be due.

Retirement Relief

A gain on the disposal of a business or farm by an individual aged 55 years or older for a consideration not exceeding Euro750,000 is exempt from capital gains tax. There is no limit where the disposal is to a child or a niece/nephew that works in the business. Marginal relief applies where the consideration does not greatly exceed that amount. Where the disposal is made to a child of the individual (or, in certain circumstances, to a nephew or niece), the gain is exempt irrespective of the amount of the consideration.

This relief also applies to the disposal of a family business where the business consists of a group of companies having at their head a holding company.

 

Site to a child

Where a parent transfers a site to a child to enable the child to construct his or her principal private residence thereon and the value of the site transferred does not exceed Euro500,000, the transfer is exempt from CGT. The site excluding the residence must not exceed 1 acre in size. 

CGT Indexation Factors

The Revenue Commissioners have made Regulations specifying the multipliers to be used for indexation purposes in order to arrive at the expenditure allowable as a deduction in computing chargeable gains accruing on disposals of assets made in the year of assessment 2003. Indexation will not apply to assets acquired after 31st December 2002.

1974/75

7.528

1988/89

1.553

1975/76

6.080

1989/90

1.503

1976/77

5.238

1990/91

1.442

1977/78

4.490

1991/92

1.406

1978/79

4.148

1992/93

1.356

1979/80

3.742

1993/94

1.331

1980/81

3.240

1994/95

1.309

1981/82

2.678

1995/96

1.277

1982/83

2.253

1996/97

1.251

1983/84

2.003

1997/98

1.232

1984/85

1.819

1998/99

1.212

1985/86

1.713

1999/00

1.193

1986/87

1.637

2000/01

1.144

1987/88

1.583

2001

1.087

 

 

2002

1.049

 

 

 

 

 

 

 

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