Capital Gains Tax Relief

Current legislation allows for relief from Capital Gains Tax with regards to properties purchased before the end of 2014. This relief is known as the property purchase incentive. Normally, an Irish tax resident individual is liable to Capital Gains Tax at 33% on any worldwide gains. The property purchase incentive allows for a complete exemption from Capital Gains Tax provided certain conditions are met.

Finance Act 2012 introduced this relief for properties purchased between 7 December 2011 and 31 December 2013. This relief was subsequently extended in the last budget by one year to include proper ties bought to the end of 2014.

The legislation states that on a disposal of land or buildings to which this section applies, such portion of the gain shall not be a chargeable gain as represents the same proportion of the gain as 7 years bears to the period of ownership of such land or buildings. Essentially, this means the relief will only apply where property is purchased in the period outlined above and is held for seven years. Where the property is held for 7 years, the gains accrued in that period will not attract CGT. However, where the property is held for a period in excess of seven years, the relief from CGT is only allowed in the proportion that seven years bears to the total period of ownership. For example, a property held for 10 years will be 7/10ths exempt from CGT.

The incentive applies to “land or buildings” and will apply to both residential and commercial property. To qualify for relief the land or buildings must be situated within Ireland or an EEAState (an EU Member State or Iceland, Lichtenstein or Norway). Although, the relief is available with regards to properties in any EEAState, full consideration should be given to any taxes arising in that other jurisdiction, if the property is located outside Ireland.

A further condition which must be met for this relief to apply, is that the land or buildings must be acquired at market value or at 75% or more of market value if purchased from a relative. There are also anti-avoidance provisions which must not be breached in order for this relief to apply in relation to the purchase of any property.

Clearly, this is a very attractive relief, which will potentially allow investors to realise any gains on properties purchased in 2014 in 2021 tax free. If you are unsure as to the application of this relief to the purchase of any property, I would advise that you contact a qualified tax advisor.

If you wish to discuss this relief further, please do not hesitate to contact RDA Accountants’ Tax manager George Skelton CTA, ACA, at our Wexford office for further assistance.