Charge to tax

You are potentially subject to capital gains tax if you dispose of an asset (s 28). An asset means property in any form including intangible property, such as an option or debt (s 532). A disposal includes a part disposal (s 534) and the deriving of a capital sum from an asset (s 535).

Capital gains tax applies to an your chargeable gains accruing in each tax year after deducting allowable losses (s 31). Capital gains accruing to a partnership are separately assessed on the individual partners (s 30).

Residence

If you are resident or ordinarily resident in the Republic of Ireland for a tax year you are chargeable to capital gains tax in respect of any chargeable gains accruing to him in that tax year.

If you are neither resident nor ordinarily resident in the Republic of Ireland you remain chargeable to capital gains tax on the disposal of:

(a) land in the Republic of Ireland,

(b) minerals in the Republic of Ireland or mining exploration rights,

(c) assets in the Republic of Ireland that were used for a trade carried on by that person through a branch or agency in the Republic of Ireland.

If you are not domiciled in the Republic of Ireland you are not chargeable to capital gains tax on the disposal of assets situated outside the Republic of Ireland and the UK, unless you remit the proceeds into the Republic of Ireland. Such remittances are treated as accruing when received in the Republic of Ireland (s 29).

Capital gains tax rates

In general your chargeable gains (including gains arising on disposals of development land) are taxed 20%. This rate has applied since 1 December 1999.

You may be taxed at 40% rate in relation to:

(a) gains on disposals of foreign life assurance policies or foreign deferred annuity contracts (s 594(2) (f)), and

(b) gains on the disposal of a material interest in an offshore fund (s 747A) located in a non-EU non-treaty country.

Exemptions

The main exemptions from capital gains tax are:

(a) Annual exempt amount. The first €1,270 of your chargeable gains for a tax year is exempt (s 601).

(b) Chattel exemption. If the proceeds you received from the disposal of durable chattel (“tangible movable property” other than wasting assets) do not exceed €2,540, the gain is exempt (s 602).

(c) Gains on government and certain other securities (s 607).

(d) Gains realised by pension funds (s 608) and charities (s 609).

(e) The following gains are also exempt (s 613):

(i) instalment savings scheme bonuses,

(ii) prize bond winnings,

(iii) compensation for damages or personal injury,

(iv) lottery and betting winnings, and

(v) a gain on the disposal of pension rights.

(f) Transfer of residential site from parent to your child, provided the site is to construct your child’s principal private residence, and its market value does not exceed €500,000 (s 603A).

Reliefs

The main reliefs from capital gains tax are:

(a) “Retirement” relief: This applies if you are aged 55 or more and you dispose of a farm or business (“qualifying assets”), i.e., chargeable business assets – including shares in a family company that you have held for 10 years or more.

If the disposal is within the family (s 599), i.e., to your child the gain is exempt.

If the disposal is outside the family (s 598) the potential capital gains tax is reduced to nil provided the disposal proceeds do not exceed €750,000. If the disposal proceeds exceed €750,000, marginal relief ensures the potential capital gains tax may not exceed half the difference between the proceeds and €750,000.

Assets held personally by you as owner of a family company may also qualify for relief provided they are disposed of at the same time and to the same person as the family company shares.

Retirement relief also applies to compensation proceeds from the decommissioning of fishing vessel, provided you have owned and used the vessel for six years before the payment date and were 45 years of age at that time.

From 31 January 2008, retirement relief is subject to a “bona-fide commercial reasons” anti-avoidance test.

If you were a partner in a dissolved farming partnership, no gain arises on the disposal of a partnership asset which was owned and used by the partnership for 10 years prior to the dissolution. The asset is treated as acquired at the same time, and for the same consideration as originally acquired by you.

(b) Transfer of business to company (s 600). If you transfer a business and all its (non-cash) assets as a going concern to a company in exchange for shares in that company, the base cost of those shares (for the purposes of future disposals) is reduced to match the cost of the assets.

(c) Disposal of principal private residence (s 604). If you disposal of your main residence the gain is exempt, provided you occupied or were deemed to have occupied the residence throughout your period of ownership, with the exception of the last 12 months of ownership.

Indexation

Sources

Capital Gains Tax (Multipliers) (2003) Regulations 2003 (SI 12/2003).

Capital Gains Tax (Multipliers) (2002) Regulations 2002 (SI 1/2002).

Capital Gains Tax (Multipliers) (2001) Regulations 2001 (SI 125/2001).

Capital Gains Tax (Multipliers) (2000-2001) Regulations 2000 (SI 76/2000).

Capital Gains Tax (Multipliers) (1999-2000) Regulations 1999 (SI 111/1999).

Capital Gains Tax (Multipliers) (1998-99) Regulations 1998 (SI 110/1998).

Losses

If a transaction results in a gain being chargeable, a loss, if it had arisen on the same transaction, is allowable (s 546).

Self assessment

If you incur a chargeable gain in a tax year you must pay preliminary tax (s 952):

(a) in respect of gains made up to 30 September, on or before 31 October in that year, and

(b) in respect of tax on gains made from 1 October to 31 December, on or before 31 January in the next year.

You must also file a return on or before the “pay and file” date, i.e., 31 October in the tax year following the year in which the gain was made (s 958(2)).

Revenue powers

See Administration, Anti-avoidance, Information, Audit and Collection under INCOME TAX: Revenue powers.

Withholding tax

If you buy any of the following assets, you must deduct 15% withholding tax from the purchase price, unless the seller can produce a tax clearance certificate:

(a) land in the State,

(b) minerals in the Republic of Ireland or mining exploration rights,

(c) exploration or exploitation rights in a designated area,

(d) shares deriving their value from (a), (b) or (c).

You need not deduct withholding tax if the value of the assets does not exceed €500,000 (s 980).

Appeals

See INCOME TAX: Appeals.