Section 604A of the Taxes Consolidation Act 1997 (as per section 64 of the Finance Act 2012)  gives relief from capital gains tax for property purchased between 7 December 2011 and 31 December 2013 where that property is held for more than 7 years. Where the property is held for more than 7 years, the gains attributed to that 7-year period will not attract capital gains tax.

No capital gains tax is payable on one’s principal private residence but what if you are buying a second property – say an apartment or house? Normally capital gains tax will be payable when you sell this on but under section 604A if you hold on to the property for 7 years then the gain attributed to this 7-year period will not attract capital gains tax.

For a simple example, you buy an investment property for €150,000 by the end of year deadline. You let it out for the next 7 years. It appreciates in value for the next 7 years so that in December 2020  you sell it for €225,000 (roughly going up €10,000 per year). The €75,000 gain would normally attract capital gains tax @ 33% (€24,750) however due to section 604A you get relief from the tax and pay no capital gains tax.

The relief will only apply where the property was acquired for full consideration in the case a bargain at arm’s length or for at least 75% of its market value where it was acquired from a relative. Relative for this purpose means a brother, sister, uncle, aunt, niece, nephew, ancestor or lineal descendant.

Any income, profits or gains from the property must be subject to Irish income tax/corporation tax.

The relief will not apply if arrangements have been put in place and it can be shown that the relief would be less if the arrangements had not been put in place.

Tags: capital gains tax, cgt

Aug 12, 13