The standard rate of Irish capital gains tax, CGT, on disposals of all assets is 33%.
From 1st January 2016 a new relief (titled "entrepreneur's relief") reduced the rate of CGT on disposals of qualifying business assets to 20%. Finance Bill 2016 (published on 20th October 2016) provides for a further reduction in the rate of CGT to 10% on disposals of qualifying assets on or after 1st January 2017.
It should be noted that the relief is only available to individuals and is available irrespective of whether one or multiple disposals take place.
How does this relief work?
Each individual will qualify for the lower rate of tax on the aggregate amount of profits or gains up to a limit of €1m. This limit applies to disposals on or after 1st January 2016 during the indivdiual's lifetime (at 20% and 10%).
Any gains above this amount will be taxable at the normal rate.
Who qualifies for relief?
The relief applies to any individual who has owned business assets for 3 years or more in the period of 5 years immediately before the date of disposal.
What assets qualify for the relief?
The relief applies to a disposal of 'chargeable business assets'. This includes any asset such as goodwill which is:-
An asset used for the purposes of a 'qualifying business' carried on by the individual,
An interest in an asset used for the purposes of a qualifying business carried on by the individual,
A holding of ordinary shares in a company whose business consists wholly or mainly of carrying on a qualifying business, or
A holding of ordinary shares in a holding company of a qualifying group.
Certain rules must be met when dealing with shares and employees/directors must also meet certain conditions.
Do all businesses qualify for relief?
The lower rate of tax does not apply to disposals of assets in certain businesses such as investments and land development.
For information or expert tax advice on this relief or any other tax or estate matter you can contact us at:-