Irish Taxation Institute: Educating, Developing and Representing

Capital Gains Tax

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 and the United Kingdom, 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 deriving the greater part (>50%) of its value from such property or mineral rights,
• assets used for the purposes of a trade carried on in the State through a branch or agency.

Basis of Charge

The tax is charged based on each tax year (i.e. 1 January to 31 December).

Irish Capital Gains Tax Rates

The standard rate of capital gains tax for disposals, including disposals of development land is 25%.  A rate of 40% applies to disposals of certain foreign life assurance policies and foreign investment products.

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 was adjusted for inflation (indexation) relief for all taxpayers, including companies and non-residents, for expenditure incurred on or before 31 December 2002.  It does not apply to expenditure incurred on or after 1 January 2003.  This indexation adjustment was never made in respect of any expenditure incurred within one year of the date of disposal of the asset.

In the case of development land, indexation relief applied 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).

CGT Exemptions & Reliefs

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

1. The first €1,270 of taxable gains by an individual in a tax year is 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:

1. Irish government securities, including land bonds, prize bonds, savings certificates and bonuses payable under the National Instalment Savings Scheme;
2. securities of local authorities, certain State-sponsored bodies and the European Union;
3. futures contracts based on government and other securities that are not chargeable assets for the purposes of capital gains tax;
4. life assurance policies and contracts for deferred annuities, unless purchased from another person etc.
5. chattels sold for €2,540 or less;
6. wasting chattels, such as private motor cars, animals;
7. winnings from betting, lotteries and sweepstakes;
8. gains accruing to superannuation funds, charities and certain bodies, such as local authorities and trade unions;
9. certain works of art valued at not less than €31,740 where they have been loaned to an approved gallery or the proposed Irish Heritage Trust for a period of not less than ten years for display to the public;
10. 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.