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Capital Gains Tax (CGT)

A tax on profits made from the sale of certain assets, such as property or shares.

Sections

What is Capital Gains Tax (CGT)?

Capital Gains Tax (CGT) in Ireland is a tax on the profit (or "gain") made when you dispose of an asset. Disposal includes selling, gifting, exchanging, or transferring ownership of an asset. The tax is levied on the difference between the price you paid for the asset (acquisition cost) and the price you sold it for (disposal proceeds), after accounting for allowable deductions.

Who is Liable to Pay CGT in Ireland?

  1. Residents of Ireland: If you are a resident or ordinarily resident in Ireland, you are liable to pay CGT on worldwide gains.
  2. Non-Residents: Non-residents are only liable to pay CGT on gains arising from:
    • Irish land and buildings.
    • Assets used in an Irish business.
    • Shares deriving their value from Irish land or buildings.

Key Features of CGT in Ireland

  1. Standard CGT Rate: The standard rate of CGT in Ireland is 33%.
  2. Annual Exemption: Each individual is entitled to an annual tax-free allowance of €1,270. This means the first €1,270 of your gains in a tax year is exempt from CGT.
  3. Tax Year: The Irish tax year runs from 1 January to 31 December.
  4. Joint Ownership: If an asset is jointly owned, each owner can claim the €1,270 exemption separately.

Assets Subject to CGT

CGT applies to a wide range of assets, including:

  • Property (land, buildings, and houses).
  • Shares and investments.
  • Business assets.
  • Antiques, art, and collectibles.
  • Cryptocurrency (e.g., Bitcoin).

Exemptions from CGT

Certain disposals are exempt from CGT, including:

  1. Principal Private Residence: Gains from the sale of your main home are exempt, provided it was your primary residence throughout the ownership period.
  2. Small Gifts: Gifts where the market value is less than €3,000 per year per recipient are exempt.
  3. Government Compensation: Compensation for personal injury or illness is exempt.
  4. Transfers Between Spouses: Transfers of assets between spouses or civil partners are exempt.
  5. Charitable Donations: Disposals to approved charities are exempt.

Allowable Deductions

When calculating your taxable gain, you can deduct:

  1. Acquisition Costs: The original purchase price of the asset.
  2. Enhancement Costs: Costs incurred to improve the asset (e.g., renovations).
  3. Incidental Costs: Costs associated with buying or selling the asset, such as legal fees, auctioneer fees, and stamp duty.

How to Calculate CGT

  1. Determine the Gain: Subtract the acquisition cost and allowable deductions from the disposal proceeds.
    • Taxable Gain = Disposal Proceeds - (Acquisition Cost + Allowable Deductions)
  2. Apply the Annual Exemption: Deduct the €1,270 annual exemption (if applicable).
  3. Calculate the Tax: Multiply the taxable gain by the CGT rate of 33%.

Payment and Filing Procedures

  1. Payment Deadlines:
    • CGT is paid in two instalments, depending on when the disposal occurs:
      • Disposals from 1 January to 30 November: CGT must be paid by 15 December of the same year.
      • Disposals from 1 December to 31 December: CGT must be paid by 31 January of the following year.
  2. Filing a Tax Return:
    • You must report your CGT liability on your annual Form 11 (for self-assessed individuals) or Form CG1 (for CGT-specific returns).
    • The deadline for filing is 31 October of the following year.

Special Considerations

  1. Indexation Relief: For assets acquired before 2003, you can adjust the acquisition cost for inflation using an indexation factor. This reduces the taxable gain.
  2. Losses: Capital losses can be offset against capital gains in the same tax year. Unused losses can be carried forward indefinitely to offset future gains.
  3. Non-Resident Landlords: If a non-resident disposes of Irish property, the buyer must withhold 15% of the sale price unless the seller provides a CG50 clearance certificate from Revenue.
  4. Inheritance and Gifts: CGT may apply to gifts or inheritances, but these are also subject to Capital Acquisitions Tax (CAT). The two taxes are separate but may overlap in certain cases.

Practical Steps to Comply with CGT

  1. Keep Records: Maintain detailed records of all asset transactions, including purchase and sale agreements, receipts, and invoices for allowable expenses.
  2. Use Revenue Online Service (ROS): Register for ROS to file returns and pay CGT online.
  3. Seek Professional Advice: For complex transactions, consult a tax advisor or accountant to ensure compliance and optimize your tax position.

Penalties for Non-Compliance

Failure to pay or file CGT on time can result in:

  • Interest on unpaid tax (currently 0.0219% per day).
  • Penalties for late filing or underpayment.
  • Revenue audits, which may lead to additional fines.

Example Calculation

Scenario: You sell an investment property for €300,000. You originally purchased it for €200,000 and spent €20,000 on renovations. Legal fees for the sale were €5,000.

  1. Disposal Proceeds: €300,000
  2. Acquisition Cost: €200,000
  3. Enhancement Costs: €20,000
  4. Incidental Costs: €5,000
  5. Taxable Gain: €300,000 - (€200,000 + €20,000 + €5,000) = €75,000
  6. Annual Exemption: €75,000 - €1,270 = €73,730
  7. CGT Liability: €73,730 × 33% = €24,330

Resources and Support

  • Revenue Commissioners: Ireland's tax authority provides detailed guidance on CGT. Visit their website at www.revenue.ie.
  • Tax Advisors: Engage a qualified tax professional for personalized advice.
  • ROS Helpdesk: For assistance with online filing, contact the Revenue Online Service support team.

This guide provides a thorough overview of CGT in Ireland. If you have specific questions or need further clarification, feel free to ask!