Capital Gains Tax Relief on properties owned for longer than 7 years, now reduced to 4 years.
In the Finance Act 2017, a change was introduced to the 7-year capital gains tax exemption (CGT) for investors. The 7-year relief for CGT was introduced in 2012 and allowed for property acquired in the State or in any State in the European Economic Area from 7 December 2011 to 31 December 2014 being exempt from CGT on any gain arising on the disposal of that property.
For example, say a property was purchased on 10 February 2012 and ultimately sold on 10 February 2019 with a gain arising of €50,000. In this scenario, the total gain would be exempt from capital gains tax as the property has been held for 7 years exactly.
However, if the property is held for longer than 7 years, the Capital Gains Tax relief will only apply to the portion of the gain relating to the first 7 years of ownership. The balance is taxable in the normal way. So, say a property was owned for 12 years, realising a gain of €50,000 on disposal. In this situation, €29,167 of the gain is exempt from CGT (€50,000 * 7/12). The remainder of the gain, €20,833, is taxable at 33%.
It should be noted that if the property is sold before it has been owned for seven years, the full gain would be taxable.
The good news is that the Finance Act 2017 reduced the 7 year holding period to four years, so property owners are now able to sell the property after only owning it for four years, and still qualify for full exemption from CGT. This amendment applies to disposals occurring on or after 1 January 2018.