Capital Gains Tax (CGT), How is it taxed in Ireland for individuals and businesses?

Introduction

Navigating the landscape of capital gains tax in Ireland involves understanding the rates applicable to individuals and businesses, as well as exemptions, calculations, and reporting requirements. This FAQ provides comprehensive insights into the capital gains tax framework in Ireland, offering clarity on rates, exemptions, and the necessary steps for payment and reporting.

What is the Capital Gains Tax Rate for Individuals?

The standard capital gains tax rate for individuals in Ireland is 33% on chargeable gains. This applies to Irish residents, ordinarily residents, and non-residents disposing of certain Irish assets. There is an annual exemption of €1,270, so the first €1,270 of capital gains each year is exempt from tax for individuals. This exemption cannot be transferred between spouses.

What is the Capital Gains Tax Rate for Companies?

Companies resident in Ireland are subject to capital gains tax at 33% on worldwide capital gains. The 33% rate applies to both trading and non-trading gains. Non-resident companies are liable for capital gains tax in Ireland on disposals of assets related to an Irish branch or agency, Irish land and buildings, Irish mineral rights, and unquoted shares deriving most of their value from Irish assets.

What are the exemptions from Capital Gains Tax?

Some key exemptions from capital gains tax in Ireland include:

• Transfers of assets between spouses and civil partners, including divorced or separated couples if under a court order
• Disposal of an individual’s principal private residence, with conditions around use, time periods, and land value
• Annual exemption of €1,270 per individual
• Disposal of government stocks
• Sale of business assets by a retiring business owner or farmer, up to €750,000 lifetime limit
• Sales of business by Entrepreneur (CGT of 10% on the first €1m)
• Disposal of principal private residence in the final 12 months of ownership 
• Gains arising from betting, lotteries, and prize bonds 

How to calculate Capital Gains Tax?

To determine the capital gains tax due, the following steps are taken:

1. Calculate the chargeable gain: Sale proceeds of asset
   (-) Cost of acquiring the asset
   (-) Enhancement expenditures
   (-) Allowable expenses like fees
2. Deduct any allowable losses from the tax year
3. Deduct the annual exemption of €1,270 if applicable
4. Apply the capital gains tax rate of 33% to the taxable gain This determines the capital gains tax liability. Even if no tax is due, a return must still be filed.

Payment and Reporting of Capital Gains Tax

The deadlines for paying and reporting capital gains tax in Ireland are:

• For disposals from January 1 to November 30, tax is due by December 15 of that year
• For disposals in December, tax is due by January 31 of the following year
• The return reporting the capital gains tax must be filed by October 31 of the year after the disposal The return is generally filed using Form CG1. It can also be included in the annual Income Tax return. Even if no tax is due, a return must still be filed to report the disposal.

Key Takeaways

• The capital gains tax rate for individuals in Ireland is 33% on chargeable gains. There is an annual exemption of €1,270, so the first €1,270 of capital gains each year is exempt from tax.
• The capital gains tax rate for companies in Ireland is 33%. Companies resident in Ireland are liable for tax on worldwide capital gains.
• Some key exemptions from capital gains tax in Ireland include:
  • Transfers between spouses/civil partners
  • Disposal of principal private residence (with conditions)
  • Gains under €1,270 per individual per year
  • Sale of government stocks
  • Disposal of business assets for retiring business owners and farmers
• To calculate capital gains tax, the chargeable gain is determined by taking the sale proceeds and deducting the cost of acquisition and any enhancement expenditures. Allowable expenses like fees can also be deducted.
• Capital gains tax is due by 15 December for disposals from January to November. For December disposals, tax is due by 31 January of the following year.
• Capital gains tax must be filed by 31 October of the year following the disposal, even if no tax is due. The return is filed using Form CG1 or included in the annual Income Tax return.

Conclusion

This covers the key aspects for understanding capital gains taxation in Ireland, including tax rates, exemptions, calculation, and payment deadlines. Both individuals and companies in Ireland are subject to capital gains tax on qualifying asset disposals, with some exemptions. Careful reporting is needed, even when no tax is due on a gain.