How to compute capital gains tax?
In summary, the general form of the CGT computation is:
PROCEEDS Less DEDUCTIBLE EXPENDITURE
= CHARGEABLE GAIN
When computing your CGT, it is always best to check initially:
(a) That you are in fact liable to Irish tax in the first place (i.e., that you are resident or ordinarily resident in Ireland for tax purposes, or that the asset is located in Ireland).
(b) That the proceeds are (or the gain is) liable to Irish CGT (i.e., not exempt). The following gains are exempt:
(i) A gain arising on a disposal of a wasting chattel (for example, an aircraft, car, yacht or horse). If the proceeds arising on the disposal of a durable chattel (as opposed to a wasting chattel) are less that €2,540, the gain is exempt.
(ii) A gain arising on the disposal of your principal private residence (see 4.12).
(iii) A gain arising on the disposal of a property acquired between 7 December 2011 and 31 December 2014, provided the property is held for at least seven years.
(iv) A gain arising on the disposal of securities issued by the government, local authorities, semi-State bodies, the Housing Finance Agency, a securitisation body, certain EU bodies, and An Post.
(v) A gain arising on a disposal to a charity, provided the property is applied for charitable purposes.
(vi) Instalment saving scheme bonuses, prize bonds and lottery winnings, and compensation or damages for personal injury.
(vii) A gain arising on the disposal of pension rights, of an annuity (but not a deferred annuity), or rights to payments under a covenant.
(viii) A gain arising on the disposal of an artwork, which prior to the disposal had been on loan for not less than 10 years, for public display.
CGT Computation for the tax year 2015
To computer your capital gains liability, nine steps are required:
Step 1: Calculate the PROCEEDS, i.e., the consideration for disposal of asset;
Deduct: incidental costs of disposal, 4.12
Step 2: Calculate DEDUCTIBLE EXPENDITURE:
Take the acquisition cost of the assets
Add: Incidental costs of acquisition
Apply indexation factor (to 2003) if applicable:
Add expenditure on enhancing the asset
Apply indexation factor (to 2003) if applicable:
Step 3: Calculate CHARGEABLE GAIN (or allowable loss)
Subtract Step 3 result from Step 1 result
Step 4: Deduct allowable loss, if any,
Step 5: Deduct annual exemption
Step 6: To calculate your GROSS TAX LIABILITY:
Apply tax at 33%
Deduct: Withholding tax paid
Deduct: Foreign tax credit under double tax treaty
Deduct: Tax paid by donation of heritage items
Step 7: Add surcharges and interest, if applicable.
Add: Late filing surcharge
Add: Interest on late payments