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Capital Gains Tax

Introduction

Capital Gains Tax (CGT) is a tax charged on the capital gain (profit) made on the disposal of any asset. It is payable by the person making the disposal. The gain/profit (the difference between the price you paid for the asset and the price you sold it for) is considered taxable income.

Budget 2014

The relief from Capital Gains Tax (CGT) (for the first 7 years of ownership) for properties purchased between 7 December 2011 and 31 December 2013 was extended by one year to include properties bought to the end of 2014. Where property purchased in this period is held for seven years the gains accrued in that period will not attract CGT.

A new CGT incentive is being introduced to encourage entrepreneurs (in particular "serial" entrepreneurs) to invest and re-invest in assets used in new productive trading activities.

CGT retirement relief is being further extended to disposals of leased land in circumstances where, among other conditions, the land is leased over the long-term (a minimum lease of 5 years) and the subsequent disposal is to a person other than a child of the individual disposing of the farmland. The purpose of the measure is to encourage older farmers who have no children to whom to transfer their farm to lease out their farmland over the long term to younger farmer.

What is an asset?

An asset is not just something you own outright, it may be an intangible asset. For example, goodwill in a company or an option over assets are considered assets. It can also be something you have an interest in, for example, a leasehold interest in land.

How are assets disposed of?

Disposing of an asset doesn't just refer to the sale of an asset for money. It includes any transfer of ownership by way of exchange, gift or settlement on trustees. Transfers of assets between spouses and civil partners are exempt from Capital Gains Tax. Transfers of assets between spouses and civil partners who are separated are exempt from Capital Gains Tax if they are made under a Separation Agreement or a court order. Read here for more information about tax and separation or divorce. The transfer of a site from parent to child for the purposes of constructing the child's principal private residence, where the site's market value does not exceed €500,000, is also exempt from Capital Gains Tax.

Budget 2013 included a new relief on capital gains tax for agricultural land transactions leading to efficient farm restructuring.

There is no Capital Gains Tax on assets passed on death. When the person who acquired the assets comes to dispose of them they are treated as if they had been acquired at their market value on the date of the death.

Capital gains exempt from Capital Gains Tax

Gains or profit on the disposal of some assets are specifically exempted from Capital Gains Tax, these include:

  • Gains on the disposal of property owned by you (house or apartment) 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.
  • Gains from betting, lotteries, sweepstakes, bonuses payable under the National Instalments Savings Scheme and Prize Bond winnings.
  • Gains on Government Loans and Debenture issued by certain Semi-state bodies.
  • Gains on disposal of wasting chattels, that is movable goods, for example, animals and private motor cars.
  • Gains on life assurance policies (unless purchased from another person or taken out with certain foreign insurers on or after 20 May 1993).
  • Gains made by individuals on tangible moveable property worth €2,540 or less at the time of disposal.
  • In Budget 2012, a new incentive relief from CGT was introduced for the first 7 years of ownership for properties bought between 7 December 2011 and the end of 2013, where the property is held for more than 7 years. The relief applies to all property, whether residential or non-residential. The relief does not apply if a property is sold within 7 years of its acquisition. If it is sold more than 7 years after acquisition and a gain is made on the sale, relief will be given for the initial 7-year holding period. For example, if the property was bought in January 2012 and sold in January 2022, the property would have been held for 10 years, so 7/10 of any gain will be relieved from CGT and 3/10 is taxable. This relief applies to land or buildings in the State and to land or buildings situated in any EEA state.

Rate and payment of Capital Gains Tax

The standard rate of Capital Gains Tax is 33% for disposals made on or after 5 December 2012.

Disposals from: Rate of CGT was:
7 December 2011 to 5 December 2012 30%
8 April 2009 to 6 December 2011 25%
15 October 2008 to 7 April 2009 22%
On or before 14 October 2008 20%

A rate of 40% however, can apply to the disposal of certain foreign life assurance policies and units in offshore funds. Revenue provide a computation sheet for non-complex situations, to help you find out how much Capital Gains Tax you may have to pay (pdf).

For certain windfall gains the windfall gains rate of tax (pdf) is 80%.

Capital Gains Tax can be more complex than the examples above. For this reason you should get advice from Revenue (see 'Further information' below). Revenue also publishes a Guide to Capital Gains Tax (pdf).

The first €1,270 of taxable gains in a tax year are exempt from CGT. If you are married or in a civil partnership this exemption is available to each spouse or civil partner but is not transferable.

Payment of CGT

For 2009 and subsequent years the tax year is divided into a revised set of two periods:

  • An 'initial period' from 1 January to 30 November
  • A 'later period' from 1 December to 31 December.

For disposals in the initial period CGT payments are due by 15 December in the same tax year. CGT for disposals in the later period are due by 31 January in the following tax year.

For example, if you dispose of an asset in the period January to November 2014 you must pay the Capital Gains Tax due to Revenue before mid December 2014. If you dispose of an asset in December 2014 the Capital Gains Tax will be due on 31 January 2015.

For 2003 to 2008 the tax year was divided into two periods:

  • An 'initial period' from 1 January to 30 September
  • A 'later period' from 1 October to 31 December.

For disposals in the initial period CGT payments were due by 31 October in the same tax year. CGT for disposals in the later period were due by 31 January in the following tax year.

For example, if you disposed of an asset between 1 January and 30 September 2008 you must pay the Capital Gains Tax due to Revenue on or before 31 October 2008. If you disposed of an asset in the later period, that is, between 1 October 2008 and 31 of December 2008 you must pay the Capital Gains Tax due on or before 31 January 2009.

Payment of Capital Gains Tax

Send a cheque for amount of CGT due with a CGT payslip to the Collector General's office in Limerick.

There are two different disposal periods for CGT, this will determine the date payment is due and also which CGT payslip is required. Payslip A is for disposals in the ‘initial period’ and payslip B is for the ‘later period’. Contact Revenue for CGT forms.

How to submit a return for capital gains

You must submit a tax return on all disposals.

You must file a return on or before 31 October in the year following the tax year in which you disposed of the asset. Though you may file your return the following year, you must pay the Capital Gains Tax in the same year as the disposal of the asset, unless you dispose of the asset in the 'later period' (see 'Payment of Capital Gains Tax' above).

If you assess yourself for tax purposes (self-assessment) you should make a tax return on Form 11 (pdf). If you are a PAYE taxpayer should make a return on a Form 12 (pdf). Trusts and Estates should make the return on a Form 1 (pdf). If you are not required to make an income tax return you must send a CG1 form to Revenue.

Further information

For further infomation on Capital Gains Tax, contact the Revenue Commissioners.

Page updated: 21 January 2014

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