capital Gains Tax

[strewth]

If a person emigrates, rents their PPR for a couple of years and then sells it to buy in another country, are they liable for CGT?

 

[mf1]

Probably.

And if there is any question of the said person being non resident or trying to be funny about non payment of CGT, the solicitor will insist that the CGT is discharged before releasing balance of funds.

mf

 

[shanegl]

I think you will.

It would be based on:

Total gain * (Period of occupation + 12 months)/Total period of ownership

You wouldn't suffer any CGT if you returned to Ireland and lived in the house again before selling. But it would have to be a considerable time period, not just a couple of weeks.

 

[ClubMan]

You wouldn't suffer any CGT if you returned to Ireland and lived in the house again before selling.

This is not true. Once it has been rented out or otherwise not a PPR for more than 12 months of the period of ownership then some portion of any eventual resale gain is assessable for CGT.

 

[shanegl]

No, that's wrong. For a start, if you're forced to move to another part of the country due to your employer, you are allowed to rent it out. When you return (within 4 years) it will be considered a deemed occupation.

I was wrong in another respect though, I should have said that the period abroad had to be required by your employer.

 

[ClubMan]

The original post contains no evidence that the original poster was seconded abroad.

It's also totally wrong - but a seemingly common fallacy - to say that moving back into a property as ones PPR having rented it out previously somehow reinstates full owner occupier CGT relief on the eventual resale.

 

[asdfg]

Hope you have declared the profit from the rental income and you are registered with the PRTB

See also the [broken link removed]

 

[shanegl]

I was right the first time. You are wrong Clubman.

From the Revenue website: http://www.revenue.ie/leaflets/cgt1.pdf

Partial Relief
Full exemption may not be due if only part of the house has been used as the individual’s residence, in
which case an apportionment is made to arrive at the exempt portion of the total gain. This may
happen where the house is used partly for business purposes or where rooms in the house have been
let.
The exemption is also restricted where the taxpayer has not lived in the house for long periods.
However, a period of up to twelve months immediately before the end of the period of ownership is
treated as a period of occupation even though the owner may not have been actually living in it during
that period.
In addition to the twelve months referred to above, the following periods of absence from the house are
also regarded as periods of occupation provided that, both before and after those periods, the
house was the owner’s only or main residence and that throughout those periods he/she had no
other house eligible for exemption:-
(i) any period throughout which the individual was employed outside the State
and
(ii) a period of up to four years during which the individual was required by the conditions of his/her
employment to reside elsewhere.

 

[ClubMan]

I would not depend on the Revenue's summary guides for authoritive and comprehensive tax advice. Being seconded abroad in work is one thing. Unilaterally choosing to go is another. In the former case there may be scope for retaining owner occupier status and benefits - but not if the property is rented on the open market. In the latter this is not possible.

 

[shanegl]

The taxpayer is perfectly entitled to rent out their house under those two conditions, in the same way that they can rent it out during the 12 month deemed occupation period. If you had the misfortune of ever studying this stuff you would know that.

 

[ClubMan]

You are saying that I can up sticks and work abroad of my own volition, rent my property out and then come back years later (and live in it again for a while?) and be totally exempt from CGT on the eventual resale? This is simply not true.

 

[shanegl]

The conditions are very strict but if you followed them correctly I don't believe there would be any tax exposure. Of course, like any advice posted on this site, you would want to get professional advice before you go doing anything like this. Anyway, this is getting away from the OP though, who definitely would have a CGT bill.

 

[newyork]

Based on formula above following is my scenario:
Purchase house 1999 for 149,829,
Had it as PPR for 3 years
Rented for past 6 years (whilst overseas, my choice, not work releated)
Current Value 365,000

((215,171 * 4) / 9)

= 95,631 less 1,270
= 94,361 taxable at 20%
=18,872

give or take a few expenses.

Does this seem the correct method for calculation

In what scenario is indexation used.

 

[ClubMan]

Purchase house 1999 for 149,829

IR£ or €?

Had it as PPR for 3 years
Rented for past 6 years (whilst overseas, my choice, not work releated)

Then (6-1)/9 = 5/9 = c. 55.55% of any overall gain is assessable for CGT.

((215,171 * 4) / 9)

This looks wrong to me.

give or take a few expenses.

If you have any previously incurred capital losses (e.g. eircom?) then these must be written off against gains first.

In what scenario is indexation used.

If the acquisition was prior to 2003 (?) then you index the acquisition price for inflation. www.revenue.ie has summary information on this.

 

[newyork]

Thanks for feedback, but I'm very confused.

All values in euros

I assumed period of ownership was PPR + 12 months hence 3 years + 1 =4

So I assumed as the purchase was made in 1999 indexation must be used as well.

 

[ClubMan]

I assumed period of ownership was PPR + 12 months hence 3 years + 1 =4

It is. But that means that CGT is chargeable in respect of the 6 years that it was rented out less the additional 1 year post PPR occupation exemption - i.e. 5/9ths of the total gain is assessable for CGT. Not 4/9ths as you have it above.

So I assumed as the purchase was made in 1999 indexation must be used as well.

Not must be but it makes no sense not to since it reduces your overall liability. The details of indexation and the relevant indexation figures are available on www.revenue.ie.

Since you are confused about the calculations you really should get professional advice.

 

[Luternau]

If a person emigrates, rents their PPR for a couple of years and then sells it to buy in another country, are they liable for CGT?

Are you non resident ? Ordinarily resident for tax purposes? The reason I ask is that your residency status has a big bearing on whether you are liable for CGT on the sale of the property as you indicate above.

Its complicated, but the gist of it is -if you sell within 5yrs or less of being non assesable for Irish Tax, a CGT charge arrises on the gain. Example; if you are non resident (tax definition) for 4yrs , and sell the property in year 4, the gain is deemed to have arrisen on the last day you were assesable for tax here (4yrs ago) and a liability arises. Sell after 5yrs of non resident status, and no chargeable gain arrises.

These Anti-voidance contitions were introduced through the Finance Act 2003 to prevent wealthy Irish persons using existing legislation to become temporally non resident to avoid paying CGT on chargeable gains. I believe the catalyst was the massive taxes lost to the ecxhequer from the sale of Esat by Dennis O'Brien to BT).

See Revenue Guide to CG CG1 for more information. When dealing with complex matters, you should engage the services of a tax professional.