Capital Gains Tax
Capital Gains Tax (CGT) is a tax charged on the capital gain (profit) made on the disposal of any asset. It is paid 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.
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.
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. If the assets are disposed of by the personal representatives of the person who has died, they are responsible for any gains between the date of the person’s death and the date the assets are disposed. The annual exemption from CGT of €1,270 (see below) does not apply to personal representatives. The exemption only applies to people disposing of assets in their own right.
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.
- Gains made on the disposal of property acquired between 7 December 2011 and 31 December 2014 can get relief from CGT in certain cases. However, this relief does not apply if the property was acquired by gift or inheritance. The relief applies to all property, whether residential or non-residential. To get this relief the property must be held for more than 7 years. 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.
- Gains made on the disposal of property acquired between 7 December 2011 and 31 December 2014 and held for more than 4 years but less than 7 years are exempt from CGT. However, this relief does not apply if the property was acquired by gift or inheritance. To qualify for this exemption, disposal of the property must take place on or after 1 January 2018. For example, any gain from a property bought on 1 June 2012 and sold on 1 July 2018 is exempt from CGT.
There are further reliefs from Capital Gains Tax available on Revenue's website.
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.
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.
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 2018 you must pay the Capital Gains Tax due to Revenue before mid December 2018. If you dispose of an asset in December 2018, the Capital Gains Tax will be due on 31 January 2019.
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 you 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 (pdf) to Revenue. See the CG1 form Helpsheet (pdf).
For further information on Capital Gains Tax, contact the Revenue Commissioners.