Capital Gains Tax - Finance Bill 2012

The rate of CGT is increased from25% to 30%, with effect from 7 December 2011.

Retirement Relief

Substantial changes to veryvaluable ‘retirement relief’ provisions of CGT law had been anticipated for a number of years. Whilst the relief remains in place a number of important changes are introduced in Finance Bill 2012. These changes – which will apply to disposals made on or after 1 January 2014 - are as follows:

The Minister’s stated intention inintroducing the respective caps of €500k and €3m for persons aged 66 or over is to encourage early transfer of family business to the next generation.

In anticipation of restriction oreven abolition of CGT ‘retirement relief’ provisions many family business owners arranged transfers of shares to their children during 2011. In most cases a redemption of founder shareholder equity occurred in tandem with the transfer to the children, allowing the founder shareholder to realise up to €750,000 from the company free of tax. We would expect that this will continue during 2012.

CGT holiday – Investment property

A new CGT incentive measure isbeing introduced to encourage residential and commercial property investment. Broadly, where a person acquires a property between 7 December 2011 and 31 December 2013 and holds this property for at least 7 years then any gain arising will be exempt from CGT, to the extent that such gain relates to the first 7 years of ownership (e.g. if the property has been held for 10 years then 7/10 of the gain is exempt).

Whilst the clear intention of thegovernment in introducing this measure is to encourage investment in Irish property, to avoid breach of EU freedom of capital rules the exemption applies to investment in any property within the EU/EEA. In many cases this may not be of particular benefit in respect of foreign property investment as most EU/EEA states are likely to impose tax on local property gains. However a number of countries, most notably the UK, do not impose tax on local property gains of Irish investors. This represents an opportunity for those who believe the UK / London property market is an attractive investment proposition.

Please contact Brian Dignam - Partner OSK for further information.

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