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Capital Gains Tax Exemption extended to 2014 – Good News for Property Purchasers

The reader will be aware that an Irish tax resident individual or company is liable to Irish tax on worldwide income and gains. This means that a gain arising on the disposal of property by an Irish tax resident, wherever situate, is liable to Capital Gains Tax (CGT), the rate of which currently stands at 33%.

In an attempt to stimulate the Irish property market the Government has introduced a CGT exemption for all properties that were purchased between the Finance Act 2012 budget date i.e. 7 December 2011 and 31st December 2013.  This relief has now been extended by the Finance (no.2) Act 2013 41/2013 to cover all purchases bought up to and including 31st December 2014.

 

Tax Free Sale

It will be of interest to investors to note that where a property is purchased between the above mentioned dates and such property is held for a period of greater than seven years, the gains attributed to that seven year period will be exempt from CGT.

There is no obligation for the investor to sell the property after seven years. Where such property is held for a period of greater than seven years, any chargeable gain arising in subsequent years will be reduced in the same proportion that 7 years bears to the period of ownership of the land or building.

For example, if a building which has been held for 10 years is disposed of, the chargeable gain in respect of that that building will be reduced by seven-tenths.

 

Property within the EEA – 30 Jurisdictions

The relief applies to “land or buildings” i.e. residential or commercial properties within countries of the EEA (i.e. the countries of the European Union, Lichtenstein, Iceland and Norway) Presumably for reasons to do with EU rules against state aid, the relief applies to all such property located in the European Economic Area, including Ireland.

 

Limitations

In order for the relief to apply the property must be acquired for a consideration equal to the market value, or if acquired from a relative, not less than 75% of the market value on the date acquired.  It should be noted that new legislation underpinning the relief contains anti-avoidance measures and provisions designed to guard against artificial arrangements.

 

Update

Following last week’s Budget 2015 announcement, Minster for Finance Micahel Noonan has confirmed that the CGT relief is to expire on 31 December 2014. Investors should be aware that there is now only a limited window of opportunity to avail of this incentive.  We offer a fast and efficient conveyancing service should you wish to acquire a suitable property

For more information on the above please contact Deirdre Farrell, Solicitor and AITI Chartered Tax Consultant (CTA), Amorys Solicitors, Suite 10, The Mall, Beacon Court, Sandyford, Dublin 1. Tel: 01-213 59 40 

© January 2014 and October 2014