Some very important classes of assets are exempt from Capital Gains Tax. This includes principally;
- a debt owed to the original creditor;
- domestic currency;
- movable assets with an expected life of less than 50 years (a wasting chattel);
- other wasting chattels / movable assets sold by individuals for less than €2540;
- government securities (national debt; comprised in bonds and bills);
- securities (issued by some specified public bodies;
- gains on pension funds;
- standing timber and underwood (the same may be apportioned on a sale of both; t
- proceeds of life assurance policies and interest in the same by original owner; (but not others)
- lottery winnings ;
- compensation for personal injury;
- compensation for injuries to a person in his profession of life assurance
- bonus payable under the Government Instalment Saving Scheme;
- prizes received on prize bonds;
- compensation or damages for wrong or injuries suffered by an individual to his person or in his profession;
- winnings from betting, including lotteries, sweepstakes etc
- compensation received by turf cutters under the Cessation of Turf Cutting Compensation Scheme for giving up the right to cut turf in special areas of conservation or National Heritage Areas; 30
- certain other statutory schemes of compensation provided by the statefrom time to time
Annuities & Settlements
The disposal of rights to the following are exempt
- an allowance annuity or capital sum payable out of a pension scheme for employees and dependents
- annuities granted by a company as part of its business of annuities on human life
- annual payments under a covenant not secured on property
The disposal of an interest under a settlement i.e. an arrangement under which there are different rights in assets is not subject to capital gains tax. However settlements and trust are subject to special capital gains tax rules which deems there to be disposals on certain other occasions which would not otherwise be disposals.
The gains on investments by an approved pension scheme are not subject to capital gains tax. This applies to retirement benefits schemes approved by revenue Commissioners. Exemption also applies to personal retirement savings accounts (PRSAs).
The disposal of a debt by the original creditor is exempt from capital gains tax. Equally, losses on the disposal of such debts are not allowable.
Some types of debts are treated as securities, for example corporate debentures. The exemption from capital gains tax does not apply to a debt on a security. This must have certain characteristics including that it must be marketable interest-bearing for a definite sum.
Finance Act 2020 ensures that gains arising from disposals of currencies held in a bank account, which are not in the currency of the State, are subject to CGT. The purpose of this amendment was to address the situation whereby the same foreign currency transferred between bank accounts held by the same person has the potential to crystallise a chargeable gain or an allowable loss without an accompanying economic capital gain or loss. The amendment applies to disposals on or after 14 October 2020.
The creation of the charge or mortgage over an asset to security debt is not a disposal for capital gains tax purposes. Where a secured asset is accepted in satisfaction of the debt, is a disposal of the market value of the property.
Certain anti-avoidance applies. Acquisition and disposal of debts by connected persons to the original creditor are subject to restrictions.
Capital gains tax, in effect, ignores transfers between spouses living together. They are deemed to have taken place at a cost that yields no loss and no gain. In effect, the spouse takes the acquisition cost (or “base”) of the other spouse.the same exemptions apply to civil partners.
In the case of spouses where one is non-domiciled the anti-avoidance provisions around remittance may make a transfer of a foreign gain to the spouse taxable on the basis of being deemed a transfer to the non-domiciled taxpayer.
The exemption is not available for spouses including former and separated spouses where the recipient spouse would not be subject to Irish capital gains tax if they disposed of the asset received in that year (foreign resident). It does not apply to transfers of trading stock.
Divorce & Separation
Transfers between spouses who are divorced in accordance with the court order is in that regard are not subject to capital gains tax. Spouse treatment applies so that the recipient is deemed to have acquired at the same time and cost as the transferring spouse.
Where a person disposes of an asset to his spouse where they have been judicially separated by order of parties to a deed of separation or are the subject of an order in divorce proceedings capital gains tax does not apply. The anti-avoidance provisions require that the recipient spouse be subject to Irish capital gains tax.
The relief applies to orders requiring transfer of spouses by an Irish court under a foreign judicial separation or divorce or transfers by a foreign court in the context of foreign divorce and foreign judicial separation
A wasting chattel is one with a predictable life of less than 50 years. This exemption is very broad. However, it does not apply to movable items which qualify for capital allowances.
Non- wasting movable items (those with an expected life of more than 50 years) are subject to capital gains tax. However, there is an exemption for individuals where the monies received, does not exceed €2540. This exemption applies to each disposal. Their only limitation is that where items are part of a set they must be looked at collectively.
Some public sector entities are exempt from capital gains tax. This includes
- Central bank
- Courts service
- Many agencies and regulators
Aa registered trade union is exempt where the proceeds of disposal giving rise to the game are reinvested solely for the purposes of the trade unions activity.
Certain approved bodies established for the promotion of athletic or amateur games are sports enjoy a similar exemption to the extent that the proceeds of the disposal are reinvested and applied for the purposes of promoting their athletic.
A protected raised bog restoration initiative scheme provides for management agreements with the Minister for the purpose of the habitat or the birds directive or other environmental protective scheme with the lessees and occupiers of land, land owners, lessees and occupiers for the purpose of migration dispersal or genetic exchange of wild species and conservation, restoration and protection of the land.
Payments under the scheme are not subject to capital gains tax although they are technically deemed capital gains. The purpose is to provide exemption to incentivize land owners and holders of rights to implement the new protection measures.
There is relief for charitable gains on compensation payable arising from the cessation of turf-cutting compensation scheme in Natural Heritage Areas and Special Areas of Conservation.
There is exemptions for certain disposals to local governments corporate service bodies, public bodies and charities.