Capital Gains Tax (CGT) is something that most people will have heard of, but until it has to be paid — we often don’t give it much thought. Even when people do need to pay it, it can be difficult to understand what exactly this tax is and under what circumstances it needs to be paid.
Especially for expats (or people returning to Ireland after living abroad), CGT can be a nasty surprise if you’re not prepared for it. The current Irish rate of Capital Gains Tax is 33% of the chargeable gain you make, so knowing a little bit about it before you need to pay it is advisable! Additionally, an even higher rate of 40%/41% can apply to the disposal of certain life assurance policies or offshore funds.
To make things easier, we’ve outlined some things you should know if you’re moving to Ireland and still have foreign assets or gains that you want to use or dispose of.
First up: What is Capital Gains Tax?
In short, CGT is a tax that is paid on the profit made from the sale (or disposal) of a property or investments. With CGT, it is usually the difference between the price you paid for the asset and the price you sell it for that the tax applies to. Therefore, it is the profit on paper that is taxed, not the amount of money that you end up receiving.
In addition to this, CGT can also apply if you dispose of an asset in the form of gifting it to someone else. However, CGT is not applicable to assets that you give away to charity, or assets that you sell/gift to a spouse or civil partner.
Note: If your spouse later sells or disposes of the asset themselves, they may be subject to CGT.
What does Capital Gains Tax usually apply to?
CGT is usually applicable for the sale, gift or exchange of assets including (but not limited to):
- A property
- Stock shares or shares in companies
- Assets of a trade
- Currency (that is not Irish currency)
- Patents and copyright
CGT isn’t a straightforward tax in the way many people think, so if you’re unsure, the best thing to do is to get a second opinion from someone in the know.
What types of residents will need to pay Capital Gains tax In Ireland?
In general, CGT applies to all Irish tax residents (and ordinary residents) and does not discriminate in terms of how long you’ve lived in Ireland, or what country you come from. However, some exemptions may apply.
For example, if you are resident but not domiciled in Ireland, you might only have to pay Irish CGT on the money that you bring into Ireland. (See more about the remittance-basis of tax in Ireland here).
As already mentioned, it’s also important to remember that once you arrive in Ireland, certain items such as jewellery or collectible antiques can be considered as assets. These items may then be liable for Irish CGT upon their sale if you are resident in Ireland. This is why it’s important to seek advice on CGT if you are unsure about the sale of certain assets.
Do I need to pay Capital Gains Tax on the sale of foreign property or other assets?
While in some cases, CGT on foreign property will need to be paid in the country that the property is in, if you are resident or ordinarily resident in Ireland, Irish CGT will also apply to you.
Note: While Capital Gains Tax policies from other countries might sound similar to Ireland, always check each individual country’s own rates and guidelines. Different conditions will apply to different countries, so don’t assume that Ireland has the same rules as the country you’re moving from!
What if I only own part of a foreign asset?
If you only own part of an asset, you will only be required to pay CGT on your share of the asset. For example, if you own 50% of a house and that house is sold, your personal CGT tax liability is only for this 50%.
Ireland’s tax system attempts to be as fair as possible, but in some cases, it might take time to gain clarity on what exact taxes you are liable to pay. If you are currently going through a separation or divorce that will eventually divide your assets, it’s good to speak with a tax expert during this process and before your move to Ireland.
What if I inherit a property from abroad?
If you inherit a property and then sell this property later, you may be liable to pay CGT. As mentioned previously, if you are gifted or inherit a property you will not be liable to pay CGT but you may be liable to Capital Acquisitions Tax.
On the tax implications of inherited property Revenue note:
“In general, there is no CGT due on an asset when transferred on death. If a personal representative sells the asset during the administration period CGT may be due.
If you receive an asset following a death there may be Capital Acquisitions Tax implications.”
What relief is available for Capital Gains Tax?
Certain assets might be exempt from CGT but the golden rule is to never assume what is exempt and what isn’t. Especially if you are an expat moving to Ireland, it is vital that you know what is ahead so you can avoid any unforeseen additional expenses.
Some examples of what you don’t need to pay CGT on includes (but is not limited to):
- A lottery win
- Prize bonds
- Government stocks
- Private motor cars
- Profit from betting
- Certain life assurance policies
A personal exemption that is worth taking note of also exists in Ireland. Under this exemption, the first €1,270 of your gain or gains (after deducting losses) are exempt from CGT during each tax year.
What should I do if I’m unsure about selling a foreign asset as an Irish resident?
If you’re unsure about if or how much capital gains tax you’ll have to pay on foreign assets before, during or after your move to Ireland — the advice will always be to contact an expert for advice. The tax system in Ireland can be difficult to manoeuvre without the right knowledge, so knowing as much as possible before the sale of foreign assets can save you time, money, and stress.
Moving to Ireland is already a big step to take, so allowing someone else to worry about your tax liability helps to streamline the process.
To speak with our team about capital gains tax, or any other tax matters, you can book a consultation with us. We don’t overwhelm our clients with tax jargon or sales pitches, we focus purely on getting to the bottom of your tax concerns.
DISCLAIMER The material in this article is for general information purposes only and does not constitute legal or taxation advice. Specific legal and taxation advice should be sought before acting or refraining to act. All information and taxation rules are subject to change without notice. No liability whatsoever is accepted by Expats Taxes for any action taken in reliance on the information in this article or any of the articles in our blog series.