Capital Gains Tax (CGT) in Ireland is a tax you pay when you sell an asset for more than you paid. However, not all gains are taxed. Some exemptions and reliefs can reduce or remove the tax you owe. Understanding these exemptions can help you save money. Examples include selling your main home, certain business assets, and spouse transfers. This guide explains the key CGT exemptions in simple terms, so you can know when and how you might avoid paying this tax in Ireland.
What Is Capital Gains Tax (CGT) in Ireland?
If you sell a return on an asset for a profit, you must pay Capital Gains Tax (CGT) in Ireland. This is a “capital gain,” and it is the profit you realize. CGT is paid on property, shares, land, and collectibles. The current CGT rate is 33%. You only pay CGT on the profit—not the entire sale price. Some exemptions and reliefs may reduce the tax. There are deadlines for reporting and paying the CGT to Revenue, which depend on when the sale occurs. Always document what you purchased and sold.
Common Capital Gains Tax Exemptions in Ireland
There are various exemptions under Capital Gains Tax (CGT) in Ireland, which may lower or eliminate your tax bill. Here are some of the common CGT exemptions outlined in layman’s terms so they can be better understood when tax may not apply.
PRR (Private Residence Relief)
You can escape CGT when you sell your main home (the one you reside in for more than 50% of the time). This is known as Principal Private Residence Relief. You only qualify if it has been used as your primary residence for the entire duration of ownership. However, if you rented or used it for business sometime during the period of ownership, only a portion of the gain will be tax exempt.
Transfers Between Husband and Wife and Civil Partners
You will not pay CGT when you transfer an asset to your husband, wife, or civil partner. If you are not living together, this rule does not apply. The rationale behind it is an exemption from tax when couples transfer property, shares, or other assets between each other.
Disposal of Impaired Assets (for example, vehicles, equipment)
Wasting assets are items that depreciate over time and have a lifespan not exceeding 50 years, like cars, machines, some equipment, etc. You generally won’t pay CGT if you profit from selling one of these, as they will most likely depreciate over time anyway. If you used the asset in a business, that will not be the case; if you claimed tax relief, the allowance will be withdrawn.
For small business owners selling equipment or machinery, business tax consulting in Ireland provides strategies to optimize exemptions and reduce liabilities.
Gains from Government Securities
Certain Irish government bonds and securities are CGT-exempt. Gain on a disposal of certain types of government-issued investments is not taxable. This exemption is intended to encourage individuals to invest in the country’s financial system.
Special Reliefs Reducing CGT Liability
Some special reliefs in Ireland can reduce the amount of Capital Gains Tax (CGT) you must pay. These reliefs are mainly for people selling business assets, especially when retiring or closing a business.
Entrepreneur Relief
Entrepreneur Relief reduces the CGT rate to 10% on gains from the sale of business assets, instead of the standard 33%.
To qualify:
- You must have owned the business or shares for at least 3 years.
- You must have been involved in running the business.
- The relief applies to gains up to €1 million.
This is helpful for business owners who want to sell their business or part of it and pay less tax on the profit.
Retirement Relief
Retirement Relief allows people aged 55 or over to sell or transfer business assets without paying CGT, in some cases.
There are two main limits:
- If you are 55 to 65, there is no CGT on gains up to €750,000.
- If you are over 66, the limit is €500,000.
You do not have to retire to get this relief, but you must meet conditions, such as owning the business for 10 years.
Relief for Assets Used in a Business
You may qualify for CGT relief if you sell assets used in your business, such as buildings or machinery. These assets must be used directly in the industry.
This relief helps reduce CGT when the sale is part of closing or restructuring the business. To understand how asset sales interact with overall company finances, consult our corporate accounting services in Ireland for accurate advice.
Assets Not Subject to Capital Gains Tax
In Ireland, some assets are exempt from capital gains tax. So you never pay CGT when you sell or dispose of them. These are the most frequent examples of this:
- Key home (principal private residence), if you qualify
- Cash or cash in your bank accounts
- Automobiles: including classic, vintage, and collectible cars
- Chattels for sale at €2,540 or less
- Irish government securities and bonds (if eligible)
Wasting assets, such as machinery or equipment, with a non-business life of less than half a century
- Lottery, sweepstakes, and prize winnings
- Charitable proceeds applied for charitable purposes
- Transfer of Marriage/Civil Partnership Assets
These exemptions lower the amount of tax you pay and make your financial situation easier to assess. Now there may be rules or conditions that apply to your original home or business property. It’s always best to double-check with Revenue or a tax advisor if in doubt.
Process of Claiming a CGT Exemption in Ireland
If you qualify for a CGT exemption or relief, you must follow the correct process to claim it. Here’s how to do it:
- Keep detailed records of when you bought and sold the asset, including prices and any costs (legal fees, stamp duty, etc.).
- Check if you qualify for a specific exemption or relief, such as Principal Private Residence Relief, Entrepreneur Relief, or Retirement Relief.
- Calculate your gain, even if you believe it’s exempt. This shows Revenue that you reviewed your situation properly.
- If you’re self-assessed, file a CGT return with Revenue using Form CG1 (for paper filing) or Revenue Online Service (ROS).
- Clearly state the exemption or relief you are claiming and provide supporting details.
- Submit the return on time—CGT payment and return deadlines depend on when the sale occurred.
If you’re unsure, talk to a tax advisor or check Revenue’s website for guidance.
Conclusion
Capital Gains Tax exemptions in Ireland. Understanding the tax-exempt assets and circumstances enables you to minimize or entirely avoid paying tax on your gains by making the right decisions. There may be some relief here if you are selling your home, transferring an asset to a spouse (or similar), or retiring from a business; take care, however, as the exceptions can lead to nasty surprises. Ensure you check the rules and seek help if necessary. Knowing these exemptions will save you money, relief, and peace of mind with taxes.
FAQs
Who Qualifies for Principal Private Residence Exemption?
If the property was your main home for the entire period you have owned it, you are eligible for the Principal Private Residence exemption. You should previously have lived in the property, not rented it or used it for business.
Are Gifts to Children Exempt From CGT?
Children are also not completely exempt from CGT gifts. For CGT purposes, an asset gifted will be at its market value. In certain instances, however, the tax may be diminished or eliminated through Retirement Relief or other exemptions.
How Can Business Owners Reduce Their CGT Liability?
Reliefs such as Entrepreneur Relief (10% on gains of up to €1m) and Retirement Relief (full or partial exemption if over 55) may also provide business owners with a means of significantly reducing their CGT. Having good records and planning also works in your favor.
What Documentation Is Required To Claim An Exemption?
Evidence of ownership, purchase and sale dates, usage of the property (in terms of CGT), and costs involved (i.e., legal fees) will be required to support a claim for exemption. Be sure to also fill out the appropriate tax forms and explain the exemption claimed.
Is There A Minimum Period For Property Ownership For Exemption?
Yes, you must have occupied the property as your primary residence for the PPR exemption. While no minimum exists, the longer you occupy the house, the stronger your entitlement to a 100% exemption claim.