Capital gains tax
Capital gains tax is imposed at a flat rate of 20% on the following:
i. gains from the disposal of immovable property in the Republic.
ii. gains from the disposal of shares of companies not listed on a recognised stock exchange which owns immovable property in the Republic.
To calculate the capital gain, the following are deducting from the sale proceeds:
i. the value of the immovable property as at 1 January 1980 or the cost of the property if the acquisition is later. An adjustment is made for inflation (indexation allowance).
ii. the cost of any additions after 1 January 1980. An adjustment is made for inflation (indexation allowance).
iii. any expenses related to the acquisition and disposal of immovable property might be deductible subject to certain conditions, e.g. legal expenses, professional fees, property transfer fees, stamp duty.
Subject to certain conditions, individuals are entitled to deduct the following lifetime deductions:
Disposal of principal private residence (subject to conditions) - €85.430
Disposal of agricultural land by a farmer - €25.629
Any other disposal - €17.086
These deductions are granted once in the lifetime of the individual until fully exhausted and if an individual claim a combination of them, the maximum deduction granted cannot exceed €85.430.
The following disposals of immovable property are exempt from capital gains tax:
Transfers arising on death.
Gifts between parents and children, spouses and up to third degree relatives.
Gifts to a company where the shareholders are members of the donor’s family and continue to be members of the family for five years after the date of the transfer.
Gifts by a family company to its shareholders provided such property was originally donated to the company. The property must be kept by the recipient for at least 3 years.
Gifts to charities or to the Republic.
Transfers as a result of reorganisation.
Exchange or disposal under the Agricultural (Consolidation) Laws.
Exchange of properties, provided the following conditions are met:
i) the Land Registry determines that the two properties are of identical value.
ii) both parties of the exchange have their Title Deeds.
iii) the exchange between the parties should be simultaneous.
iv) the whole of the gain made on the exchange has been used to acquire the other property. The gain derived from the exchange reduces the cost of the new property and the tax is paid when the new property will be disposed.
Capital losses may be used to offset future capital gains.
The above should be used only as a source of general information and it is not intended to provide, and should not be relied on for tax, legal or accounting advice. It is also subject to Disclaimer. Before engaging in any transaction you should seek for professional advice.
For further details on these issues, please do not hesitate to contact us.