How to Avoid Capital Gains Tax on Property in Ireland: A Comprehensive Guide

Thinking about selling property in Ireland? You might worry about paying Capital Gains Tax (CGT) on any profit you make. But don’t worry there are legal ways to reduce or even avoid this tax. In this blog post, we’ll explain simple and clear steps you can take to minimize your CGT when selling property. Whether it’s your home or an investment, understanding these tips can save you money. Let’s explore how you can keep more of your earnings and make smart choices when it comes to property tax in Ireland.

Capital Gains Tax (CGT) is a tax you have to pay when you make a gain selling a property in Ireland. The current rate is 33% on the gain (the profit you make after selling, not total sale), You will be able to write off your purchase price, legal fees, as well as any enhancements you made to the property. You also receive a tax-free allowance every year of €1 270 per person. 

Capital Gains Tax (CGT) typically pertains to elements like second homes, rental properties, or even land. Typically, your primary residence is not included, as long as you lived there as your only home. This amount of tax must be paid within certain deadlines.
To ensure correct calculations and reporting, consult our Tax Service In Ireland for full Revenue compliance.

What Is Capital Gains Tax on Property in Ireland?

Capital Gains Tax (CGT) is a tax you have to pay when you make a gain selling a property in Ireland. The current rate is 33% on the gain (the profit you make after selling, not total sale), You will be able to write off your purchase price, legal fees, as well as any enhancements you made to the property. You also receive a tax-free allowance every year of €1 270 per person. 

Capital Gains Tax (CGT) typically pertains to elements like second homes, rental properties, or even land. Typically, your primary residence is not included, as long as you lived there as your only home. This amount of tax must be paid within certain deadlines.

Who Pays CGT on Irish Property?

CGT is the tax you pay in Ireland when selling or disposing of a property and a profit is made. However, there is an exemption for certain property sellers from having to pay CGT. It really depends on who you are and what type of property you are selling.

Individuals Who Sell Property

As an individual, when you dispose of a property in Ireland and realize a gain (profit) on the disposal, you may have to pay CGT on that gain. Your gain is the sale price minus what you paid for the property.

• Main residence exemption: If the property is your main home where you lived for the whole time, you usually don’t have to pay CGT. This is called the “Principal Private Residence Relief.”

   

• Other properties: If the property is not your main home, such as a rental property, holiday home, or land, then CGT usually applies.
• Calculation of CGT: You pay CGT on the profit after deducting allowable costs like buying expenses, selling expenses, and improvement costs.

Companies and Trusts

CGT is also payable on the gain when property is sold where a company or trust is a property owner in Ireland.

• Corporates are charged a capital gains tax (CGT) of 33% on disposals of property by a company.
• CGT Trusts typically pay CGT at a rate of (33%)

Non-Residents Selling Irish Property

Anyone who makes a gain from that sale of that property must pay CGT regardless of if they reside in Ireland or not.

• CGT– Non-residents are also required to submit a tax return in respect of CGT in Ireland.
• The same rules and rates apply (33% currently).

When Do Non-Residents Pay Capital Gains Tax in Ireland?

Non-residents have to pay Capital Gains Tax in Ireland only in certain cases. This usually happens when they sell or dispose of specific assets located in Ireland.

Key points:

• Non-residents pay CGT on gains from selling property or land in Ireland.

   

• This includes residential homes, commercial buildings, and land.
• Gains from selling shares in companies that mainly own Irish land or property can also be taxed.
• Non-residents do not pay CGT on assets outside Ireland.
• If a non-resident sells Irish property, they must file a CGT return and pay the tax within 30 days of the sale.
• The current CGT rate in Ireland is 33%.
• There are some exemptions, like if the property was the person’s main home before moving abroad.
• Non-residents should keep records of purchase and sale prices to calculate the gain.

Common Legal Ways to Reduce or Avoid CGT on Property

When you sell a property in Ireland and make a profit, you usually have to pay Capital Gains Tax (CGT) on that profit. But there are several legal ways to reduce or even avoid paying CGT. Knowing these can help you save a lot of money. Below are the most common and important methods explained clearly.

1. Principal Private Residence Relief (PPR Relief)

This is the most well-known CGT relief on property.

• If the property you sell was your main home (where you lived most of the time), you usually do not have to pay CGT on the gain.
• This relief applies as long as the property was your main residence for the whole period you owned it.
• If you lived there only part of the time, you may get partial relief.
• It also applies if you lived in the property for a while and rented it out later, but only for the time you actually lived there.

Example: You bought a house and lived in it for 5 years, then rented it for 2 years before selling it. You only pay CGT on the gain from the 2 years you rented it, not the 5 years you lived there.

2. Using Annual CGT Exemption

Every individual has a small amount of CGT they don’t have to pay each year, called the annual exemption.

• For example, in recent years, the exemption has been €1,270.
• This means the first €1,270 of your total gains in a year is tax-free.
• If your total gain is below this amount, you pay no CGT.
• If you have gains on multiple properties, you can use the exemption once per year for all gains combined.

3. Deducting Allowable Expenses

When calculating your gain on selling a property, you can deduct certain costs from the sale price and purchase price.

These costs include:

• Purchase price of the property
• Costs of buying (e.g., solicitor fees, stamp duty)
• Costs of selling (e.g., estate agent fees, legal fees)
• Improvement costs (money spent on repairs or improvements that add value, not general maintenance)

By subtracting these costs, your taxable gain is smaller, so you pay less CGT. For accurate record management, our accounting services in Dublin can help maintain proper documentation for tax deductions.

4. Transfer Property Between Spouses or Civil Partners

Transfers of property between spouses or civil partners are usually exempt from CGT.

• You can transfer the property to your spouse without paying CGT at the time of transfer.
• When your spouse sells the property later, CGT may apply, but this can help with tax planning.
• For example, if one spouse has unused CGT exemption, they may use it to reduce the tax bill when the property is sold.

5. Use Losses to Offset Gains

If you have made a loss on the sale of another asset in the same or previous tax years, you can use this loss to reduce your CGT bill.

• You must declare your losses to Revenue.
• These losses can offset your gains from property sales, reducing the amount of tax you pay.
• You can carry unused losses forward for up to 8 years.

If you’re unsure how to declare or balance capital losses, our Revenue tax return assistance can handle the process accurately.

6. Invest in Certain Relief Schemes

There are special government reliefs for certain types of investments:

• Entrepreneur Relief: If you sell a business or land used for business, you may pay a reduced CGT rate.
• Other reliefs: Sometimes, investing in specific schemes or funds offers CGT relief, but these are less common for normal property owners.

To see if you qualify, explore our business tax consultant services.

7. Hold the Property Long-Term

CGT only applies when you sell or dispose of a property. Simply holding on to the property without selling means you do not pay CGT yet.

• If you can wait until your personal situation changes (e.g., you move into the property and get PPR relief), you may avoid or reduce CGT.
• Also, the value of property can increase over time, but so can your chance to benefit from reliefs.

8. Gift or Inherit the Property

Sometimes, gifting or inheriting a property can change how CGT applies.

• If you inherit a property, you do not pay CGT at the time of inheritance.
• The gain is calculated when you sell it, based on the value at the date of inheritance.
• Gifts between family members may have CGT implications, but some reliefs apply.
  

Capital gains tax on property in Ireland can be avoided or minimised legally. Reliefs such as Principal Private Residence Relief or Retirement Relief can assist. That means, plan and know your options. Always keep a paper trail, and seek legal advice if in doubt. Selling property does not necessarily trigger a huge tax drag. 

Then follow the right steps and plus you can protect your profit and be legal. Know what reliefs are applicable to your case. So, stay informed and make your property sale in Ireland more lucrative!