Hello All;
I have seen some posts on this but I am not sure if this particular scenario has been covered. I have put some figures together on this. I am not sure that I have all the bases covered. I would welcome any input regards anything that I have not thought of.I am not an accountant so this is very much a layperson’s reckoning.
It is based on a 35 year old company director purchasing a property and selling it at age 55.
Here goes
Purchased Via a Limited Company
• Profit in Limited Company €91,429
• Less Corporation Tax at 12.5% €11,429
• Profit After Corporation Tax €80,000
• Purchase Price €80,000
• Rent Per Annum €6,000
• Less Corporation Tax at 25% €1,500
• Remainder After Corporation Tax €4,500
• Less Income Tax/PRSI/USC at 53% €2,385
• Yield p.a. €2,115
• Over Life of investment of 20 Years €42,300
Purchased Personally after Personal Tax
• Profit in Limited Company €170,213
• Less Income Tax/PRSI/USC at 53.0% €90,213
• Profit after Tax Less Income Tax/PRSI/USC €80,000
• Purchase Price €80,000
• Rent Per Annum €6,000
• Less Corporation Tax at 0% €0
• Remainder After Corporation Tax €6,000
• Less Income Tax/PRSI/USC at 53% €3,180
• Yield p.a. €2,820
• Over Life of investment in 20 Years €56,400
Capital increase on investment of €80,000 after 20 years (Same for Both cases)
• €80,000 increasing at 2% p.a. grows to €118,900 after 20 years (Time of Sale)
• Capital gain= €118,900-€80,000= €38,900
• Less Capital Gains Tax @ 20%= €7,780
• Profit After Capital Gains Tax= €111,120
Wages paid to Director from profit from sale
• Profit After Capital Gains Tax €111,120
• Wages paid to director from profits after Sale €25,429
• Less Income Tax/PRSI/USC at 53% €13,477
• Wages less income Tax €11,951
• At ages 55 director may pay up to 337% of wages into pension fund €85,694
Overall income/profit when purchased via Limited Company
• €42,300 (Rental)+ €11,951 (Post Sale Wages less Tax)+ €85,694 (Pension Fund) = €139,94
• €139,945(Overall Income)-€91,429 (Original investment)= €48,517
Overall income/profit when purchased Privately
• €52,400 (Rental)+ €111,120 (Post Sale Wages less Tax) = €167,520
• €167,520(Overall Income)-€167,520 (Original investment)= -€2,693
I have seen some posts on this but I am not sure if this particular scenario has been covered. I have put some figures together on this. I am not sure that I have all the bases covered. I would welcome any input regards anything that I have not thought of.I am not an accountant so this is very much a layperson’s reckoning.
It is based on a 35 year old company director purchasing a property and selling it at age 55.
Here goes
Purchased Via a Limited Company
• Profit in Limited Company €91,429
• Less Corporation Tax at 12.5% €11,429
• Profit After Corporation Tax €80,000
• Purchase Price €80,000
• Rent Per Annum €6,000
• Less Corporation Tax at 25% €1,500
• Remainder After Corporation Tax €4,500
• Less Income Tax/PRSI/USC at 53% €2,385
• Yield p.a. €2,115
• Over Life of investment of 20 Years €42,300
Purchased Personally after Personal Tax
• Profit in Limited Company €170,213
• Less Income Tax/PRSI/USC at 53.0% €90,213
• Profit after Tax Less Income Tax/PRSI/USC €80,000
• Purchase Price €80,000
• Rent Per Annum €6,000
• Less Corporation Tax at 0% €0
• Remainder After Corporation Tax €6,000
• Less Income Tax/PRSI/USC at 53% €3,180
• Yield p.a. €2,820
• Over Life of investment in 20 Years €56,400
Capital increase on investment of €80,000 after 20 years (Same for Both cases)
• €80,000 increasing at 2% p.a. grows to €118,900 after 20 years (Time of Sale)
• Capital gain= €118,900-€80,000= €38,900
• Less Capital Gains Tax @ 20%= €7,780
• Profit After Capital Gains Tax= €111,120
Wages paid to Director from profit from sale
• Profit After Capital Gains Tax €111,120
• Wages paid to director from profits after Sale €25,429
• Less Income Tax/PRSI/USC at 53% €13,477
• Wages less income Tax €11,951
• At ages 55 director may pay up to 337% of wages into pension fund €85,694
Overall income/profit when purchased via Limited Company
• €42,300 (Rental)+ €11,951 (Post Sale Wages less Tax)+ €85,694 (Pension Fund) = €139,94
• €139,945(Overall Income)-€91,429 (Original investment)= €48,517
Overall income/profit when purchased Privately
• €52,400 (Rental)+ €111,120 (Post Sale Wages less Tax) = €167,520
• €167,520(Overall Income)-€167,520 (Original investment)= -€2,693