tAXING INVESTMENT IN IRELAND
The Irish Government is keen to attract investment and, to this end, offers various reliefs and incentives. In this blog, we will be examining those for property investment and for investment in start-ups and small businesses.
Investments in real estate and land are generally subject to capital gains tax (CGT), as well as property taxes. CGT is usually payable at a rate of 33 percent on the majority of chargeable gains, although rates as low as 12.5 percent and as high as 40 percent are imposed on certain types of gains.
Ireland offers various property-related CGT reliefs. These include:
- Farm restructuring relief, which can be claimed on the disposal of farmland in Ireland;
- Principal Private Residence Relief, which is available on the disposal of a property used entirely as a main residence for the whole period of ownership; and
- Retirement relief, which is available for Irish taxpayers over 55 who are disposing of business or farming assets. It is available to those under 55 in cases of retirement and disposal of property due to ill health.
Other property-related reliefs are available, including on the disposal of land or buildings acquired between December 7, 2011, and December 31, 2014. Full CGT relief can be claimed where the property was owned continuously for between four and seven years, and where it is disposed of on or after January 1, 2018.
Ireland also offers Entrepreneur Relief. Since 2016, the scheme has offered a CGT rate of 10 percent on gains from the disposal of “qualifying business assets”, up to a lifetime limit of EUR1m.
The assets must have been held continuously for three years, during the five years before the disposal, and must be either shares held by an individual in a trading company, or assets owned and used by a sole trader in undertaking their business.
There are several relief schemes that are intended to encourage direct investment by a business owner into a business. These include:
- Section 486C relief, which provides founders of new start-up companies with tax relief for the first three years of trading, via a corporate tax reduction for trading profits and certain chargeable gains from assets used in the course of trading. This was set to expire at the end of 2021 but was extended in the 2022 Budget for the next five years.
In addition, the relief can now be claimed for the first five years of trading, rather than the initial three.
- Start-up Relief for Entrepreneurs (SURE), which allows entrepreneurs investing in and working full-time in their own business to claim tax relief on PAYE tax paid in previous years. The business must be undertaking “qualifying trading activity”, and the maximum amount of relief that can be claimed is EUR100,000 per assessment year, claimable over a period of seven years.
- The Employment Investment Incentive (EII), which provides relief for individuals making equity investments in micro-businesses and SMEs that undertake qualifying trading activity.
The maximum amount that can be claimed by the investor per assessment year was increased at the start of 2020 to EUR250,000 (having been EUR150,000 before that).
If the investor elects at the time shares are issued to retain them for a minimum of seven years, the upper limit is increased to EUR500,000.
Budget 2022 extended the eligibility period of this relief to the end of 2024 and opened it to investments made by limited partnerships and limited investment partnerships.
- The Start-up Capital Incentive, which offers tax relief to the friends and family members of start-up founders looking to invest in a micro-business, up to a lifetime limit of EUR500,000.
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