Capital Gains Tax (CGT) reliefs

Updated on March 9, 2022

Overview

In the event that you sell an asset and make a profit, you must pay capital gains tax (CGT).

The quantity of CGT which you must pay may be reduced by applying reliefs or exclusions. CGT reliefs or exemptions are detailed in this section.

The foreign CGT you paid may be eligible for a tax credit.

Note

Even if you don’t owe any taxes, you still need to file a tax return.

Indexation Relief

Annual inflation relief is only applicable for costs incurred up to and including the end of the following year 2002. The asset must have belonged to you during this period of time.

Note

Expenses incurred in 2003 and subsequent years are not eligible for Indexation Relief

Land for Development Land for development has a greater market value than its “current usage value” in the Republic of Ireland. Land’s current value is based on the value it would have had if it weren’t being used for development. When no further progress could be made, other than of a trivial nature.)

In order to benefit from Indexation Relief, you must have owned the property at the time of the indexation. Allowable but not indexable: Development (current usage value reduced from market value) is a development value.

In what ways might Indexation Relief be used?

The cost is multiplied by the year-specific indexation factor. It is also known as the multiplier, or the indexation factor.) This indexed cost can be deducted from your capital gain as an allowed expense.

Note

The multiplier for 1974/5 should be used if the date is before April 6, 1974.

How to Obtain Indexation Eradication Assistance

When determining your capital gains tax (CGT) and preparing your tax return, use the indexed cost or costs as a starting point.

As an illustration, consider the following:
In June of 1990, Niamh paid €50,000 for an investment property. The purchase of the home cost her €2,000 in expenses. In September 2018, she sells the residence.

Indexation Relief can be granted to the purchase price and the acquisition expenditures because they were incurred prior to 2003. The 1990/91 multiplier will be used to determine the cost (1.442).

Estimation of the CGT for Niamh

€210,000

Expenses that can be deducted include:

The selling price

the 1990/91 multiplier (adjusted)

EUR 50,000 multiplied by 1.442

€72,100

Cost of acquisition

(as multiplied by the 1990/91 rate)

€2,000 x 1.442 = €2,000

€2,884

Gain chargeable

€135,016

Calculate your take-home pay.

€1,270

Gains that are taxed

€133,746

(33 percent of €133,746) is subject to CGT.

€133,746 multiplied by a factor of 33

€44,136.18

Her CGT was paid by Niamh on or before December 15, 2018. Her CGT return was submitted within the deadline of October 31st, 2019.

Sale of land for future development as an example

Revised Entrepreneur Relief

Note

There was no longer a national Entrepreneurs Relief programme in 2014 and 2015.

The CGT exemption protects these assets from capital gains tax at a 10% rate. In comparison to last year, this year’s figure is 33% lower. The rate is 20 percent from the start of the year to the end of 2016.

To be eligible for benefits, an individual must have received at least €1 million. This restriction does not apply to expenses incurred before to 2016.

The following is inescapable:

People’s stock or shares in a company where they are still employed after the death of the shareholder are exempt from capital gains tax under this clause.
How do you know if you qualify for financial aid?
Ownership of the property must be maintained for a minimum of three years. Prior to disposal, the three-year period had to have expired. An unlicensed company is not allowed to use a business asset. If you want to get a loan, you must have owned at least 5% of the company’s stock for the past three years. It’s possible that the three-year period might start at any time before the disposal.

Asset tagging for enterprises that adheres to industry standards
Listed here are some instances of company assets:

Owners of a trading firm who use the stock they own to run their business.
A company that meets the acquisition criteria.
The following are not acceptable in any way, shape, or form:

leasing property for future development as opposed to purchasing and holding securities or other assets for investment purposes
The main business of a corporation
It is necessary for the CEO to hold 5% of the company’s stock in order to effectively lead the business.

The controlling company is eligible since it is a part of a qualifying group.
As a result, the sites listed below are ineligible for help:

Dormant: One of the parent company’s subsidiaries is no longer active and does not engage in any trade activities.
Note

“Holding corporations” are commercial firms that exist primarily to hold other companies’ stock. All of the parent firm’s subsidiaries must be majority-owned by the parent business, having a holding of at least 51%.

To qualify as a “qualified group,” at least one of the group’s 51 percent subsidiaries must be operating or overseeing a qualifying company. As a result, this statistic does not include the parent company.

One person runs the entire operation.

If you’re an employee or director of a well-known company, you’ll have an advantage when applying for promotions. These are the items you’ll need:

For the next three years, you had to commit at least half of your time to the company in a managerial or technical position. It is not qualified for the tax credit programme if the three years occurred within five years of the sale of company assets.
There is a wealth of information in the newly redesigned Entrepreneur Relief Manual (RERM).

What can I do to recoup my losses?

You can apply a 10% deduction to gains from eligible company assets when calculating your CGT.

Principal Private Residence (PPR) Relief

The property must be your “Primary Private Residence” (PPR) if you own it and live there full-time in order to qualify.

Capital gains tax can be avoided if the property has been yours for the entire time you owned it.

As a family unit, you lived in your principal residence and on all of your property.
Land within a one-acre radius of a residence is likewise protected from this rule.

You are not eligible for PPR Relief if you did not occupy the property or if the sale price included the value of the development.

Note

A PPR’s final year of ownership is tallied toward the period spent residing in the property.

Your old house may still be on the market while you’re moving into your new one.

in cases when merely a fraction of your property was utilised as a house
In order to file a claim, you must have used the dwelling as your principal residence. Splitting your home in two and using one part for your personal dwelling and the other to run a small company is an option to think about. Half of the gain that would otherwise be subject to tax is exempt.

It will have no impact on your ability to claim a full tax deduction if you use Rent-a-Room.

The following is an example of what I’m talking about:

It was 2004 when Barry paid €480, 000 for a property. Since then, he’s sold it (including costs). His home will be sold in September for €580,000.

It took Barry only a fifth of the house’s total square footage to run his business while living there. An exemption on the portion of his residence that he used is limited to 80 percent of the total exemption amount.

Capital Gains Tax (CGT) will be due on a gain of 0.2%.

Details of Barry’s CGT Price Calculation €580,000

The following costs are eligible for a tax deduction:
The price at which a product is sold
Gains of €480,000 €100,000 are subject to taxation.

In this case, the PPR Relief will be $80,000.

Eighty thousand dollars.

Subtract the individual’s tax credit.
€1,270

Taxable income of €18,730

Almost €18,730 (33%) of that amount is owing in CGT.

It’s the equivalent of 18 730 Euros times 33.

€6,180.90

Barry met the December 15th, 2018, deadline for remitting his CGT. He submitted his CGT return before the October 31st, 2019 date.

If you haven’t lived in the residence for a long time, there is a restriction.
A claim can only be made for the time you actually lived in the house.

In the event that no one shows up to view the location, it is assumed that they are living there.
It is presumed that you have lived in your house if you can demonstrate that you were there:

You couldn’t use the property since you were forbidden to do so by your employer (up to a four-year maximum.)
For those who were employed outside Ireland’s borders, they were either receiving care in an assisted living facility or receiving care in a facility such as an assisted living facility for a charge.
The following is an example of what I’m talking about:
Your land’s potential for development may be restricted.
Because of how you use it, your property may have a greater value than you currently assign. The higher of the two values is what we mean by “development value.”.

For the potential development value they offer for you, your home and land up to one acre in size can be sold for the best price. This relief only applies to the value of the land or property itself, not to the value of any additions made to it..

For partial PPR Relief, you must first calculate your ‘notional gain,’ which is a fictitious gain that is not actually realised.

get an idea of how much money you’ll make, you’ll need a profit calculator
Subtracting some of the costs from the current use value is necessary.

To determine your share of the cost, multiply the total selling price by the current consumption value.
This number is used to calculate the final sale price.
Subtract this amount from the current use value.

Partial PPR Relief Calculation Methods

It’s time to figure out a potential return on your investment.
Subtract the value you paid for the house when you bought it.
Third experiment: How can I recoup my losses?
Include the relief in your CGT calculations and your tax return.

Property acquired between 7 December 2011 and 31 December 2014

If you sell a home purchased between December 7, 2011, and December 31, 2014, you may be eligible for CGT relief. The term “property” refers to land or structures.

You are eligible for this remedy if the property in question is located in the United States or any other member state of the European Economic Area (EEA).

How do you know if you’re eligible for assistance?

A property’s capital gain is exempt from CGT if it was purchased between December 7, 2011, and December 31, 2014. If you meet the following conditions, you will be granted complete exemption:

At least four and up to seven consecutive years of ownership of the land or structure were required before the property may be sold.
More than seven years of ownership
As long as you’ve owned the property for at least seven years, you’ll be eligible for some compensation.

Divide 7 by the number of years you’ve held the property to arrive at the partial relief. This tells you how much of your profit is tax-free.

As an example, if you’ve owned the property or buildings for ten years, the gain will be lowered by seven-tenths (7/10).

How do I get my money back?

When calculating your capital gains tax (CGT), you add the relief. Your CGT return must also include information about your gain.

Example 1: On January 1, 2012, Jane paid €250,000 for a property.

She’ll owe the house for another 12 years if she sells it on the first of the year in 2024.

If Jane sells the house for €280,000 in January 2024, she will have made a profit of €30,000. Jane must divide seven by twelve to arrive at her partial relief amount (number of years of ownership). Seventy-twelfths (7/12) of the gain would be deducted from her compensation.

Calculation of Jane’s capital gains tax (CGT) in 2024

€280,000

Subtract the permitted expenditures from the total.

The selling price

€250,000

The whole amount of profit that can be attributed to a business.

€30,000

Property purchased between December 7, 2011, and December 31, 2014, is eligible for some relief.

Seventy-two times twelve times thirty thousand euros

€17,500

Exemption for myself

€1,270

Gains that are taxed

€11,230

CGST is owed (33% of €11,230).

€11,230 divided by 0.3

€3,705.90

Jane must pay the CGT by 15 December 2024 and file her tax return by 31 October 2025, both deadlines being the very latest.

As an illustration, consider the following:

Disposal of a business or farm (Retirement Relief)

Note

Despite the name “Retirement Relief,” you have the option to keep working.

Those who have achieved the age of 55 may be eligible for Retirement Relief. Companies and farmers that sell some of their land are eligible for a tax break.

As long as you’re under the age of 55, you may be able to take advantage of this:

sick to the point where you are unable to work in agriculture or any other field of work (You will need to provide medical evidence of the illness.)
To be eligible for the disposal, you’ll need to be 55 or older.
What does “retirement relief” mean when it comes to the subject of retirement?
Separate categories of retirement relief exist according on whether you plan to sell your company and/or farm.

When someone who isn’t a close family member calls you “Kid,” it’s a way of addressing you.

At least five years previous to their 18th birthday, a deceased child’s niece and nephew can be adopted under the Adoption Act 2010. This claim requires the backing of more than one individual.
Transferring one’s estate to a close family member or close friends
If you’re under a certain age at the time of disposal, you may be eligible for compensation.

Disposals are included in the calculation of

Your compensation is limited to €3 million if you become 66 after December 31, 2013; but, if you turn 55 or older before that date, you are eligible for unlimited relief.
Clawback
For the next six years, if your child sells the asset, we will remove the tax-free status. When your child sells your property, you’ll owe capital gains tax, just as you would have if you’d sold it yourself.

Non-ownership acquisition of a business or farm by a third party.
If the market value of the property at the time of disposal falls below one of the following:

You must be under the age of 66 at the time of the transaction in order to qualify for the €750,000 deduction.
If you’re 66 or older and want to downsize after January 1, 2014, you’re eligible for a tax credit of €500,000.
Depending on the worth of the property, the government might be able to help out in some cases. It reduces CGT-limitation by half of the market value difference.

Clawback
Lifetime limits of €750,000 and €500,000 are in place. Financial aid will no longer be available if you go over this threshold. Every time you sell a piece of property, you’ll be subject to CGT.

The tiniest shred of hope
There may be a small bit of relief if the gains are above the benchmarks. The CGT is therefore restricted to

The most efficient way to make a claim is to use the selling price of a product and the price at which it reaches a set threshold. Retiring with Confidence
To get your final CGT, take your CGT and subtract the relief from it. Additional information must be included in your CGT filing.

A good example of what I’m referring to can be found here:.

Gerry, 59, sold his farm for €720,000 in October of last year. (the worth of the product). His age and the fact that his house is worth less than €750,000 qualify him for the entire amount of damages.

He’s exempt from the CGT, so that’s good. The deadline for submitting his 2019 CGT return is October 31st.

The following exhibits are included: 2 and 3.

Transfer of a site from a parent to a child

CGT will not apply if you transfer land to your child for the purpose of building a house. There is only one person allowed in the house, and that is your child. A joint transfer to your child can be made by you and your spouse or civil partner.

“Kid” refers to you as well.

If so, who’s it for?

You cared for your stepchild’s civil partner’s foster child for at least five years before they turned 18. You need more than one person to support this assertion.
Exactly how can you know if you’re qualified for help?
One of the following conditions must be met before the land can be purchased:

The property must be less than one acre in size and less than €500,000 in value

To what end should the alleviation be applied?

Make sure you include all of your gains and losses on your CGT return.

Clawback
CGT may be due on the transfer of land from you to your child in two situations. Demolition of your child’s farms takes place here, as the name implies.

For three years, they didn’t utilise the house they built on that site as their primary residence.
This clawback does not apply if your child transfers the land to their spouse or civil partner.