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Capital Gains Tax – The Perfect Time to Sell Property in Ireland?


James Hughes


March 14, 2022


06:12 PM

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Property prices are always a hot topic in Ireland but more so at the minute with concerns about housing stock, cost of rental and access to finance. Significant growth has also been noted in property prices over the past 12- 24 months.

Often increasing property prices can act as a deterrent for investors to bring properties to the market for sale. Many investors are of the view that Capital Gains Tax (CGT) is comparatively high in Ireland at present, pining for a return to the halcyon days of the Celtic Tiger and 20% tax rates.

We fully agree with the view that capital taxes are too high; high tax rates function as a barrier to transactions. We would certainly welcome a reduction in the CGT rate from 33% and feel such a positive change would bring more properties to the market, potentially acting as a coolant to the property market. In 2020, CGT represented only 1.67% of exchequer returns, contributing just short of €1bn to the economy. One wonders would a reduction in the CGT rate materially reduce the tax yield, or might it instead trigger natural solutions to many of our country’s property challenges?

However, CGT rates are not the focus of this commentary, or are they…?

Budget 2011 introduced a CGT incentive in December 2011 allowing a 7-year exemption for properties bought between December 2011 and December 2014. The 7-year period has now expired for all properties acquired in that period. Properties are now subject to CGT on a proportionate basis, with 7 years of the total period of ownership remaining exempt from tax. Over time, this proportionate tax benefit will erode, in particular if property prices fail to grow at rates experienced in the past 10 years. In effect, there could well be an increasing tax cost accruing the longer properties are held for.

The Residential Property Price Index in Ireland has grown from 76 in 2012 to 155.3 in November 2021. The statistics suggest that the average property bought between 2011 and 2014 may well have doubled in value.

We wonder if that rate of growth can be sustained, or if investors might be better served cashing in their chips in the near future? Certainly, there is a tax benefit to a timely exit, and we would encourage all clients to review their property portfolio’s, with a particular focus on properties bought in that 2011 to 2014 window.

Might it now be an opportune time to sell on those properties or to transfer to a connected party? Of course, gifting property could give rise to Capital Acquisitions Tax in the hands of the recipient but that is a separate conversation!!!

Learn More About Capital Gains in Ireland and More General Ireland Tax Advice

Hughes Tax & Advisory is a boutique tax practice principally serving the needs of Irish businesses and entrepreneurs. Their blend of corporate and personal experience allows their advisors to understand, address and meet the needs of both the entrepreneur and also their companies, to deliver bespoke tax solutions.

Connect with James to inquire about taxes in Ireland and how he can help ease the burden.


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