Thursday 14 December 2017

CGT break only applies to properties bought at peak

Brendan Keenan and Donal Buckley

FINANCE Minister Michael Noonan yesterday said the CGT that exemption would only be available to those who bought commercial or residential property that had been "previously acquired at the peak of the property market in the middle of the last decade, 2005 to 2008" and was sold to a new owner between now and the end of 2012.

Then the new owner must hold on to it for at least seven years. The new owner will not have to pay any CGT (now at 30pc) on any increase in the value of the property over those seven years.

The capital gains relief for purchases of commercial property could restart activity in the market, Liam Grimes, tax director at accountants KPMG, told a Budget briefing organised by the Institute of Taxation.

"It is a fairly interesting incentive," Mr Grimes told an audience of mainly tax advisers. A property bought by the end of 2013 and held for seven years will not pay tax on any profit made on the price in that period. Capital Gains Tax (CGT) was raised to 30pc in the Budget.

"Foreign investors with cash or credit are looking at Irish property," institute president Bernard Doherty said.

"Locals might regret it if they don't get in on the act now." Stamp duty on non-residential property has been reduced from 6pc to 2pc.

Mr Doherty said the Revenue and the Department of Finance had listened to business and tax advisers in framing this Budget. One result was bringing Ireland into line with other countries by reintroducing tax relief for executives seeking export business in the BRIC countries.

"It is an imaginative Budget in a lot of ways," he said.

Padraic Whelan, head of real estate and infrastructure at Deloitte, agreed that the measures were attractive to foreign investors.

"The reduction in stamp duty to 2pc on commercial property, coupled with a capital gains tax exemption on properties bought within the next two years and held for at least seven years prior to disposal, should help attract foreign investment into the property market.

"Once European economic conditions stabilise, this will hopefully allow the financial system to return to a level of normal activity and in turn these changes to the tax regime will be very helpful to those foreign investors," he said.

Mr Grimes said the measures to reward employees who contributed to research and development were "interesting".

Companies could share part of the tax credit with these workers to reduce their tax bills. "This is patent exemption back in disguise."

Mr Doherty said there had been a lot of transactions involving gifts to family members before the Budget, as speculation grew that capital acquisition tax would be tightened.

Mr Noonan increased the rate from 25pc to 30pc and reduced the tax-free amount available to children from €332,084 to €250,000.

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