Finance Act 2017 introduced a change to the current 7-year capital gains tax exemption (“CGT”) which allows for investors to sell their property after 4 years instead of the previous minimum 7-year holding period.
The recent amendment means that rather than holding the property for a minimum of 7 years, taxpayers can sell the property between the 4th and 7th anniversary of the acquisition date and qualify for full exemption from CGT. This change only applies to disposals on or after 1 January 2018.
No relief is available if the property is sold during the initial four-year acquisition period.
If the property is held for longer than seven years, relief will only apply to the portion of the gain relating to the first 7 years ownership and the balance is taxable in the normal way.
The relief continues to apply to both residential and commercial property situated in Ireland or a member of the European Economic Area and to property held by individuals and corporates.
Taxpayers must continue to meet the other conditions of the relief to qualify for the CGT exemption.
Example:
Purchase a commercial property on 1 January 2014:
- Cost €200,000
- Stamp Duty €4,000
Sell the commercial property on 1 March 2019:
- Sales Proceeds €350,000
Capital Gains Tax:
- Capital Gain = €146,000 (€350,000 – €200,000 – €4,000)
Relief:
- Full CGT relief will apply as the property was disposed of between the 4thand 7th anniversary of the acquisition date. As such, no CGT is payable on the gain of €146,000
For more information on the above tax relief, please contact Michelle Mangan, Manager of Tax Services.
Up to recently, landlords were not entitled to a tax deduction for pre-letting expenses such as mortgage interest, insurance and repairs incurred before the date a property was first let out.