Different country, different customs, as well as different amounts of taxes to pay. There are some taxes you need to be aware of, like the Capital Gains Tax in Ireland.
Capital Gains Tax (CGT) is a tax you pay on any profit made when you dispose of an asset. Not the whole amount you receive is taxed, only the chargeable gain. Usually, this is the difference between the price you paid for the asset and the price you got for it when you disposed of it. The average Capital Gains Tax in Ireland is 33%.
What is an asset?
An asset is something of value that can be converted into cash. It is not necessarily something you own outright, it can also be an “intangible” asset. For example, goodwill in a company or a leasehold interest in land can be considered assets. You have disposed of an asset if you have sold it, gifted it, exchanged it or got compensation/insurance for it. You can also inherit an asset and if you dispose of it after you have inherited it, you will be liable for CGT.
What do you pay Capital Gains Tax on?
You must pay CGT on gains made from the sale, gift or exchange of:
- land (including development land)
- buildings (houses, apartments, or commercial property)
- shares in companies (even if you are non-resident in Ireland)
- assets that have no physical form, such as goodwill, patents and copyright
- currency (other than Irish currency)
- assets of a trade
- foreign life insurance policies and offshore funds
- capital payments (in certain situations)
- other types of assets (e.g. antiques, paintings, jewellery)
In some cases, reliefs may apply. If you dispose of an asset that you jointly own, you only pay CGT on your share of the gain.
What is exempt from Capital Gains Tax?
Each tax year, the first €1,270 of your gains (after deducting losses) are exempt from CGT. You cannot transfer this exemption to your spouse/civil partner and it cannot be claimed by a company or trust. There are certain assets that are exempt from CGT. These are:
- betting, lottery wins, prize bonds and sweepstakes
- bonuses under the National Instalments Saving Scheme
- government stocks
- certain life assurance policies
- moveable property (such as furniture), where the gain does not exceed €2,540
- moveable goods, like animals and private motor cars
There are specific exemptions for spouses/partners, even when they are divorced or separated. In general, there is no CGT on an asset that is transferred on death, though there may be Capital Acquisitions Tax implications, depending on the asset.
How to calculate your Capital Gains Tax
You must always file a return if you have disposed of an asset, even if there is no tax due. CGT is only applied to the “chargeable gain”, not the whole amount you receive. It is the difference between the amount you received it for (sale price) and the amount you paid for it (purchase price) as well as any “allowable expenses”. Allowable expenses are either costs that happened because of the asset or any money spent by you which adds more value to the asset.
Always calculate your chargeable gain for the whole tax year. If you have more than one gain, add them together and don’t forget to deduct any losses. Sometimes, you need to use the asset’s “market value” instead of sale price or purchase price. You need to use it if you gift an asset to someone instead of selling it, for example. The market value is the best price you would get for your asset if you sold it on the open market. If your chargeable gain is less than €1,270, you will not have to pay any CGT. When you know what your total taxable gain for a tax year is, multiply it by the rate of CGT.
Rates of Capital Gains Tax
For most gains, the rate of CGT is 33%, although there are other rates for specific types of gains:
- 40% for gains from foreign life policies and foreign investment products
- 15% for gains from venture capital funds for individuals and partnerships
- 12.5% for gains from venture capital funds for companies (money invested in a startup company or small business)
When do you pay and file CGT?
The dates on when to pay and file CGT are based on the date you disposed of an asset. Your payment is due before you file your return. A late payment will lead to an interest charge, a late return a penalty. You must file by 31 October in the year after the date of disposal, even if no tax is due because of reliefs or allowable losses. For disposals made between:
- 1 January and 30 November (the initial period), you must pay CGT by 15 December of the same year
- 1 December and 31 December (the later period), you must pay CGT by 31 January of the next year.
For disposals made under a written contract, the time of disposal is usually the date of the contract.
How to pay CGT
If you are registered for Capital Gains Tax in Ireland, you must pay online, using Revenue Online Service (ROS) or myAccount. If you are not registered, you must first register and then use the above method to pay online. If it is exempt from mandatory e-filing, you can either email the Payment Accounting Section of the Collector-General’s Division or send payment with the appropriate payslip.
How to file your CGT return
There are several different forms of CGT returns to use, depending on your circumstances. For example, there are different forms for people who are self-employed, for companies or for people who are Pay As You Earn (PAYE) taxpayers. You can find more info about the different tax return forms on the Revenue website. When you complete your CGT return you need to include:
- a description of asset(s) you disposed of
- the amount you received for the asset(s)
- any reliefs you have claimed
- any unused losses from a prior year that are to be offset
- the chargeable gain (or loss)
- your taxable gain and CGT rate