Cash in on woodland tax relief incentives
Managing forestry so that you maximise the benefits
There are certain tax incentives in place where the managing of forestry or woodlands is carried out on a commercial basis, namely an income tax exemption on profits arising from forestry operations, a capital gains tax exemption on the sale of timber and a partial stamp duty relief on any forestry land.
Income Tax Exemption
Profits or gains arising from the occupation of woodlands managed on a commercial basis, and with a view to the realisation of profits, are not to be taken into account for any purpose of the tax acts.
The tax-free status of income is further preserved when dividends from companies are paid out of such exempted income.
Losses incurred in the occupation of woodlands managed on a commercial basis with a view to the realisation of profits may not be used to shelter a person's other income from tax. Any profits, gains or losses arising from forestry activities must be included in the taxpayer's annual return of income, even though the income or gains are exempt from tax.
The normal rules relating to the keeping of records and the making available of such records for inspection by the Revenue also apply.
Tax relief in respect of income from forestry is restricted in the context of the limitation on the amount of certain reliefs used by certain high-income individuals. Broadly, where a person is a high-income individual, they are restricted in the extent to which 'specified reliefs' can be applied to reduce the individual's tax bill. The provision works so that the 'specified reliefs' used in any one year are limited to 20pc of the individual's 'adjusted income'. If a person has other income, then the amount of the forestry exemption will be limited to the greater of €80,000 and 20pc of the total income. However, if your total income is under €125,000, the forestry income will not be caught by the high-income earners' restriction.