The Ultimate Guide to Capital Gains Tax (CGT) for New Irish Businesses

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Who should read this?

This article is written for new business owners and startup founders in Ireland who need to understand their CGT obligations. Entrepreneurs planning for future business growth and eventual exits should pay special attention.

Key Takeaways

CGT applies at 33% on business asset gains, but Entrepreneur Relief can reduce this to 10% for qualifying business disposals up to €1 million
Both companies and individual shareholders may have separate CGT liabilities when assets or shares are sold at a profit
Key payment deadlines are 15 December for most disposals and 31 January for December disposals
Personal holding companies can be an effective tool to defer CGT on large business exits
Good record-keeping of all asset purchases, improvements, and sales is essential for CGT compliance and maximising available reliefs

What is Capital Gains Tax and How Does it Affect New Businesses in Ireland?

Capital gains tax (CGT) in Ireland is a tax on the profit made when you dispose of an asset that has increased in value.

For new businesses, understanding CGT is essential as it affects your tax liability when selling business assets or shares. CGT is a tax separate from your regular income tax and requires careful planning to manage effectively.

Irish capital gains tax applies to the disposal of most assets, with some key exemptions. The CGT rate currently stands at 33%.

Understanding Capital Gains Tax in Ireland and Its Core Principles

The core principle of CGT is that it taxes the gain, not the entire amount received.

The gain is usually the difference between the price you paid for the asset and the price received when disposing of the asset.

Irish tax legislation provides various reliefs and exemptions to reduce this burden.

When determining your chargeable gain, you must account for:

The original cost of the asset
Allowable expenses related to the acquisition and disposal
Any enhancements that increased the asset's value

When Do New Businesses Need to Pay Capital Gains Tax?

Identifying Disposal Events That Trigger CGT Liability

You'll need to pay CGT if you dispose of business assets at a profit. A disposal occurs when you:

Sell a business asset
Give away an asset
Exchange an asset
Receive compensation for an asset (e.g., insurance)

Even if you transfer business assets at less than market value, CGT may still apply based on the market value rather than the actual price paid.

Real-World Examples of CGT for New Businesses

Both companies and their shareholders may face CGT liability in different situations:

Example 1: Shareholder Sells Shares

If you buy shares in your startup at €1 per share (i.e. the initial nominal value of the shares that is set at incorporation) and later sell them at €5 per share, you'll pay CGT on the €4 gain per share. This is a personal gain, so you as an individual (not the company) will pay the CGT.

This would also apply if you gave some shares to an early employee - if they made a gain on the value of the shares, then that gain will be hit with a 33% tax (save for some exceptions).

Example 2: Company Sells Property

Your business buys a premises for €200,000. Five years later, you sell it for €300,000. The company will pay CGT on the €100,000 gain (less any allowable expenses).

Example 3: Investment in Other Assets

If your business invests in crypto assets worth €10,000 that grow to €30,000, when you dispose of them, your business faces CGT on the €20,000 gain.

It's vital to understand that CGT can apply both to the company itself when it disposes of assets at a profit, and to individual shareholders when they sell their shares at a gain. These are separate tax events with separate CGT liabilities.

Irish CGT Calculator

Sale Price (€):

Original Purchase Price (€):

Expenses (€):

Apply Entrepreneur Relief (10% rate):

Capital Gains Tax Summary

Chargeable Gain: €0

Annual Exemption: €1,270

Taxable Gain: €0

Tax Rate: 33%

CGT Payable: €0

Important Tax Year Deadlines for CGT Payments (15 December and Beyond)

For CGT payments, timing is critical:

CGT due on disposals between 1 January and 30 November must be paid by 15 December of the same tax year
CGT due on disposals in December must be paid by 31 January of the following year
The deadline is 31 January for filing your complete CGT return

Missing these deadlines can result in interest and penalties, so careful planning of disposal timing can help manage cash flow.

What Capital Gains Tax Reliefs and Exemptions Are Available for New Businesses?

Exploring Retirement Relief and Business Asset Relief Options

Business asset relief (also known as Entrepreneur Relief) can reduce the rate of tax to 10% on qualifying disposals up to a lifetime limit of €1 million. This is particularly valuable for new business owners planning eventual exits.

For older business owners, retirement relief can provide a full exemption up to a lifetime limit of €1 million if selling to someone other than a child, or without limit if transferring to a child.

Using Personal Holding Companies to Delay CGT

One tool that can help defer CGT on a large business exit is a personal holding company. When you sell your business shares, instead of selling directly (which triggers an immediate CGT liability), you can:

Transfer your business shares to a holding company in exchange for shares in that holding company
The holding company then sells the business shares

This structure may allow you to defer the CGT that would otherwise be due immediately. The gain is effectively "locked" in the holding company until you eventually dispose of your holding company shares.

When combined with Entrepreneur Relief, this approach can be very tax-efficient for founders planning a significant exit. You just need to ensure the structure meets all Revenue requirements to qualify for the relief on capital gains.

Principal Private Residence and Assets Exempt from CGT

Your main residence is typically exempt from CGT under principal private residence relief. For mixed-use properties where part serves as business premises, partial relief may apply.

Other assets exempt from capital gains tax include certain government securities and life insurance policies (in most cases).

How to File a Capital Gains Tax Return for Your New Business

Step-by-Step Guide to Completing Your Gains Tax Return

To file your gains tax return:

Complete the CGT sections of your Form 11 (for self-assessed taxpayers)
Include details of each disposal separately
Calculate your net gain after reliefs and exemptions

Common Mistakes to Avoid When Reporting Capital Gains

When filing, avoid common errors like:

Forgetting to include acquisition costs
Overlooking qualifying expenditure that could reduce your gain
Failing to claim available reliefs
Missing payment deadlines

How to Calculate Capital Gains Tax for Business Assets

Determining Your Chargeable Gain After Allowances

Your chargeable gain is calculated by:

Taking the disposal proceeds
Deducting the original cost and acquisition expenses
Deducting enhancement expenditure
Deducting disposal costs
Applying any reliefs or exemptions
Deducting the annual exemption of €1,270

ItemDescriptionEffect on GainDisposal proceedsAmount received when asset is soldIncreases gainOriginal costAmount paid for the assetDecreases gainEnhancement costsImprovements to the assetDecreases gainDisposal costsLegal fees, advertising, etc.Decreases gain

Understanding the Current Rate of Capital Gains Tax in Ireland

The current rate of capital gains tax in Ireland is 33%. However, certain disposals of business assets may qualify for the reduced 10% rate under Entrepreneur Relief.

What Happens When You Dispose of Business Assets?

Record-Keeping Requirements for Business Asset Disposals

Maintain detailed records of:

Original purchase documents and dates
Costs of improvements or enhancements
Disposal documents and dates
Calculations of gains or losses

These records should be kept for at least six years after the disposal date, as Revenue may request them during an audit.

Frequently Asked Questions

What is Capital Gains Tax (CGT) and how does it affect new businesses?

Capital Gains Tax (CGT) is a tax you pay when you sell or dispose of an asset that has increased in value. For new businesses, CGT applies when you sell business assets, shares in your company, or the entire business. The tax is calculated on the profit (or capital gain) you make, not on the total amount you receive. If your new business acquires assets that later increase in value, you may face a CGT liability when you sell them. Understanding CGT early in your business journey helps with long-term financial planning and may influence decisions about business structure and asset management.

When does a new business need to pay Capital Gains Tax?

A new business needs to pay Capital Gains Tax when it disposes of assets that have increased in value since acquisition. This includes selling business premises, equipment, intellectual property, or company shares. The CGT becomes due when a chargeable event occurs - typically when you sell, gift, exchange, or otherwise dispose of an asset. For new businesses, it's important to note that CGT is only payable on the profit (the capital gain), not the entire sale amount. You'll need to report these gains on your tax return for the tax year in which the disposal took place, and payment is typically due by specific deadlines - usually January 31st following the tax year end, though some payments may need to be made earlier depending on when the disposal occurred.

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