Capital Gains Tax
/ˈkæpɪtl ɡeɪnz tæks/
Learn what Capital Gains Tax means for your Irish business, including the 33% rate, exemptions, and how to calculate your liability when selling assets. Essential reading for company owners.
Learn what Capital Gains Tax means for your Irish business, including the 33% rate, exemptions, and how to calculate your liability when selling assets. Essential reading for company owners.
Capital Gains Tax is an Irish tax charged on the profit you make when you sell or dispose of an asset that has increased in value. The tax applies to gains from assets like property, shares, business assets, and other investments, with the current standard rate set at 33% in Ireland.
Capital Gains Tax is a specific tax on the profit, or gain, that arises when you dispose of an asset. The disposal can be through sale, gift, exchange, or transfer, and the tax is calculated on the difference between what you paid for the asset (plus any allowable costs) and what you received when you disposed of it. For company owners, this becomes particularly relevant when selling business assets, shares in the company, or when transferring ownership.
In Ireland, the Capital Gains Tax regime includes several important features. There is an annual exemption of €1,270 per person, which means the first €1,270 of net gains in a tax year are tax-free. Certain assets qualify for special tax treatment, including the entrepreneur relief which reduces the tax rate to 10% on gains up to €1 million from the disposal of qualifying business assets. Understanding these reliefs and exemptions is crucial for effective tax planning.
The calculation of Capital Gains Tax involves determining the chargeable gain, which is the sale price minus the original cost and any allowable expenses like improvement costs, legal fees, and incidental costs of acquisition and disposal. The tax is typically payable by 31 October in the year following the year in which the gain arises, though different deadlines apply for gains from residential property disposals.
Capital Gains Tax is paid by individuals, companies, trusts, and other entities that make a chargeable gain from disposing of assets. Companies pay CGT on gains from non-trading assets, though trading companies also need to consider the interaction with corporation tax on business asset disposals. Irish resident individuals are subject to CGT on their worldwide gains, while non-residents are generally only taxed on gains from Irish-situated assets.
Capital Gains Tax is calculated by subtracting the original cost of the asset and any allowable expenses from the disposal proceeds. The resulting gain is then reduced by any available reliefs or exemptions, such as the annual exemption or entrepreneur relief. The net taxable gain is taxed at the appropriate rate, which is 33% for most gains, though some qualifying gains may be taxed at 10% under entrepreneur relief or other special provisions.
Capital Gains Tax applies to a wide range of assets including land and buildings, shares and securities, business assets, intellectual property, and certain other investments. Personal possessions worth more than €2,500 are also subject to CGT, with specific rules for items like art, antiques, and collectibles. Some assets are specifically exempt, including principal private residences (subject to conditions), certain government securities, and winnings from gambling.
Capital Gains Tax and income tax serve different purposes and apply to different types of gain. Income tax applies to earnings from employment, pensions, and trading income, while Capital Gains Tax applies to profits from the disposal of capital assets. The rates differ significantly, with income tax rates reaching up to 52% including USC and PRSI, while CGT has a flat 33% rate. The distinction is particularly important for business owners who need to properly characterize gains from asset sales versus trading income.
Ireland offers several important exemptions and reliefs to reduce Capital Gains Tax liability. The annual exemption of €1,270 allows every individual to have tax-free gains each year. Entrepreneur relief provides a reduced 10% tax rate on the first €1 million of gains from qualifying business disposals. Retirement relief exempts gains from disposing of business assets when the owner is aged 55 or over. There are also specific reliefs for the disposal of principal private residences, reinvestment relief, and relief for farm restructuring.
When you sell shares in a company, whether as a founder, investor, or employee, you may be liable for Capital Gains Tax on any gain. The calculation uses the acquisition cost of the shares, which includes the purchase price plus any associated costs. Special rules apply to employee shares acquired through share option schemes, with specific provisions for determining the acquisition cost. Business asset disposal relief may apply if the shares are in a trading company and you meet the qualifying conditions, potentially reducing the tax rate to 10%.
Capital Gains Tax is generally payable by 31 October in the year following the tax year in which the gain arose. For example, gains made in 2024 would be payable by 31 October 2025. However, different rules apply for gains from residential property disposals, which must be paid within 30 days of the completion date through the Revenue Online Service (ROS). You must file a tax return to declare your capital gains, with the relevant information included in your annual Form 11 or Form 12, depending on your taxpayer status.
