AITI Chartered Tax Adviser

What is CGT withholding tax?

If you buy any of the following assets the general rule is that you must withhold 15% of the value of the payment and pay over that tax to the Revenue Commissioners:

(a) land in the Republic of Ireland (ROI),

(b) minerals in the ROI or mining exploration rights,

(c) exploration or exploitation rights in a designated area,

(d) shares deriving their value from (a), (b) or (c),

(e) shares acquired, on a share-for-share basis on a reorganisation or reduction of a company’s share capital,

(f) goodwill of a trade carried on in the ROI.

You need not deduct 15% withholding tax from the price if the vendor produces a tax clearance certificate (CG50).

The vendor may apply to the Revenue Commissioners for a tax clearance certificate. The inspector must issue the certificate if:

(a) the vendor is resident in the ROI,

(b) no CGT is payable on the disposal, or

(c) the vendor has paid any CGT arising on the disposal of the asset (and any earlier disposals of the asset).

The inspector must also issue a copy of the certificate to you as the purchaser. On receipt of the certificate, you need not deduct tax from the purchase price.

In computing the tax arising on his/her chargeable gain on the disposal, the vendor is entitled, on making a claim, to a tax credit for the 15% withholding tax deducted (and paid) by the purchaser.

As purchaser, if you have withheld 15% tax, you must notify Revenue of the amount paid to the vendor within 30 days of the payment. You must also pay the 15% CGT withheld to the Collector-General.