CGT is a tax on a capital gain arising on the disposal of assets owned by you. At its simplest, deducting the price you paid for an asset when you acquired it from the sale proceeds when you dispose of it gives you the chargeable capital gain.
Put in another way, if you buy something for one price, and then sell it at a higher price or, for that matter give it away when it is worth more than you paid for it, then Revenue consider that you have made a Capital Gain and may therefore be liable to tax.
In calculating the amount of tax payable, deductions are allowable for incidental costs of acquisition, such as solicitor’s fees, stamp duty etc. and incidental costs of disposal such as, solicitors/auctioneers fees etc. In addition, where an asset was acquired before 2003, inflation relief may be available, effectively adjusting the cost in line with a published inflation factor.
Capital Gains tax planning is not easy eventhough the rules relating to it have been simplified. Nevertheless, there are some useful allowances and exemptions which do make it possible to reduce, delay and - in some instances - completely avoid this tax.
A person who is resident or ordinarily resident in the Republic of Ireland (ROI) for a tax year chargeable to CGT on his worldwide gains in that tax year.
A person who is neither resident nor ordinarily resident in the ROI, is chargeable on the disposal of ROI:
(b) minerals or exploration rights,
(c) branch or agency assets.
The first €1,270 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.
Gains exempt from CGT
Gains on the disposal of some assets are specifically exempted from CGT. These include:
a. Gains on the disposal of property owned by you (house, apartment, etc.) which was occupied by you or by a dependent relative as a sole or main residence. Restrictions may apply where the property was not fully occupied as a main residence throughout the period of ownership or where the sale price reflects development value.
b. Disposals of property acquired between 7 December 2011 and 31 December 2014, provided the property is held for more than seven years.
c. Transfer of residential site from parent to child, provided the site is to construct the child’s principal private residence, and the site’s market value does not exceed €500,000.
d. Gains from betting, Lotteries, sweepstakes, bonuses payable under the National Instalments Savings Scheme and Prize Bond winnings.
e. Gains on Government Loans and Debenture issued by certain Semi-state bodies.
f. Gains on disposal of wasting chattels (e.g., animals, private motor cars, etc.)
g. Gains on Life Assurance policies (unless purchased from another person or taken out with certain foreign insurers on or after 20 May 1993).
h. Gains made by individuals on tangible moveable property where the consideration does not exceed £2,540.
Payment of CGT
Preliminary CGT is payable:
(a) generally, on or before 15 December in the tax year, and
(b) as respects gains made in December, on or before 31 January in the following year.
The CGT return must be filed on or before 31 October in the tax year following the year in which the gain was made.
Capital Tax Rates
The standard rate in respect of disposals is determined based on the date on which the disposal was made as follows:
|from 6 December 2012||33%|
|from 7 December 2011 to 5 December 2012||30%|
|from 8 April 2009 to 6 December 2011||25%|
|from 15 October 2008 to 7 April 2009||22%|
|made on or before 14 October 2008||20%|
Exceptionally, a rate of 40% applies on disposals of certain foreign life assurance policies and units in offshore funds.
If the seller cannot produce a tax clearance certificate the purchaser must deduct 15% withholding tax from the price paid for ROI:
(b) minerals or exploration rights,
(c) shares deriving their value from (a) or (b).
This does not apply if the transaction value does not exceed €500,000.
With effect from 4 December, 2002, rollover relief is no longer be available on any disposal.
Where an asset was acquired before 2003 inflation relief may be available, effectively adjusting the cost in line with an inflation factor. Where a disposal is made on or after 1 January 2003, the indexation relief will only apply for the period of ownership of the asset up to 31 December 2002.
A loss on a disposal is allowable if the corresponding gain would have been chargeable.
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