29 Persons chargeable

Summary

This section specifies the persons chargeable to capital gains tax and the extent to which they are chargeable.

A person resident or ordinarily resident in the State is chargeable to capital gains tax on gains arising on disposals of assets wherever situated. However, such a person who is not domiciled in the State is, in the case of gains from the disposal of assets situated outside the State, chargeable only on the amount of the gains received in the State, and losses arising on such disposals are not allowable losses.

A person who is neither resident nor ordinarily resident in the State is chargeable only in respect of gains made on the disposal of certain assets. The assets concerned are —

• assets of a business carried on by such a person in the State and, in the case of overseas life assurance companies doing business in the State, assets outside the State that are used to back the Irish branch’s liabilities.
• interests in land, buildings or minerals situated in the State,
• exploration or exploitation rights in the Continental Shelf, and
• unquoted shares which derive their value from any of these assets.

[It should be noted that by virtue of section 21(3), a company is chargeable to corporation tax in respect of its chargeable gains (other than development land gains) and not to capital gains tax.]

Details

Definitions and construction

(1) “designated area” is a term used in the Continental Shelf Act, 1968, under section 2 of which the Government has power to make orders to designate areas of the sea bed outside the territorial waters of the State in which the State has exploration and exploitation rights.

“exploration or exploitation rights” is given the same meaning as in section 13.

“shares” is given an extended meaning so as to include stock and securities.

“security” includes an unsecured loan, and interest paid by a company on an unsecured loan or other consideration given by the company for such a loan is treated as if it were paid or given in respect of a security issued for the loan by the company.

Anti-avoidance

(1A) Where cash or other assets are transferred to a company to ensure that the value of shares is derived mainly from land and buildings or exploration or exploitation rights in the Continental Shelf, the value of such assets is ignored in determining the value of the shares where the transfer of the assets concerned was done for the purpose of avoiding a capital gains tax charge.

Persons resident or ordinarily resident

(2) A person resident or ordinarily resident in the State for a year of assessment is liable to capital gains tax on chargeable gains accruing to him/her in that year. Thus, the scope of the charge on such a person extends to chargeable gains on assets situated abroad as well as to those situated in the State. An individual’s residence and ordinary residence are to be determined in accordance with Part 34.

Persons neither resident nor ordinarily resident

(3) A person neither resident nor ordinarily resident in the State is chargeable to capital gains tax only on gains arising on the disposal of certain specified assets. The specified assets are —

• land in the State,
• minerals in the State, including rights and interests in minerals and other assets in relation to mining or minerals or the searching for minerals (these assets are referred to in this note as mineral assets),
• assets associated with a trade carried on in the State by the non-resident through a branch or agency, and
• assets situated outside the State of an overseas life assurance company that are held in connection with the life company’s trade in the State that is carried on through a branch or agency (i.e. overseas assets used to back the Irish branch’s liabilities).

By virtue of subsection (1), the charge is extended to gains from dealings in unquoted shares which derive their value or the greater part of their value from land or mineral assets in the State. This ensures that the charge to tax is not avoided where dealings in such assets are made not by direct sale but through the medium of share transactions. This extension of the charge does not apply to quoted shares.

Persons resident or ordinarily resident but non-domiciled

(4) In the case of a resident or ordinarily resident individual who is not domiciled in the State, the charge to capital gains tax on chargeable gains arising from the disposal of assets situated outside the State is based on the actual amount of the gain received in the State. Any such amount received is treated as a gain accruing when it is received in the State. This limitation on the charge is known as “the remittance basis of assessment”. Losses accruing to such an individual on the disposal of assets situated outside the State are not allowable losses.

(5) For the purpose of the remittance basis of assessment, gains paid, used or enjoyed in the State or in any manner or form transmitted or brought to the State are treated as having been received in the State. Also section 72 which treats income used outside the State in payment of debts as, in certain cases, received in the State applies to the similar use of capital gains made outside the State. Thus, an individual who is not domiciled in the State but is resident or ordinarily resident in the State is chargeable on any capital gains arising outside the State and used in the payment of a debt in the same way as if the individual had remitted the gains to the State.

(5A) Any amounts received, or treated under subsection (5) as received, in the State on or after 24 October 2013 which are derived from the proceeds of the disposal of any assets on which chargeable gains accrue and which are transferred outside the State by an individual referred to in subsection (4) to his or her spouse or civil partner will be treated for the purpose of that subsection as if they had been received in the State by the individual concerned.

Extension of charge to Continental Shelf

(6) The State’s jurisdiction for capital gains tax purposes is extended to gains derived from the disposal of exploration or exploitation rights in the State’s area of the Continental Shelf (these assets are referred to in this note as Continental Shelf assets). Any such gains are treated as gains accruing on the disposal of assets situated in the State. By virtue of subsection (1), this charge is extended to gains from dealings in unquoted shares which derive their value or the greater part of their value from Continental Shelf assets. This ensures that the charge to tax is not avoided where dealings in such assets are made not by direct sale but through the medium of share transactions. This extension of the charge does not apply to quoted shares.

Gains on mineral assets and Continental Shelf assets

(7) Chargeable gains arising to a person who is neither resident nor ordinarily resident in the State on the disposal of mineral assets or Continental Shelf assets are treated as being gains from the disposal of assets used for the purposes of a trade carried on by that person in the State through a branch or agency. Under this provision the resident agent of a person who is neither resident nor ordinarily resident may be charged to capital gains tax on the gains of that person.

Appeal procedure

(8) A right of appeal to the Appeal Commissioners is provided on any decision of the Revenue Commissioners on any question as to domicile or ordinary residence arising under the Capital Gains Tax Acts. The appeal is made via a notice in writing to the Revenue Commissioners which must be made within 2 months after the date of the notice of the decision. The appeal is heard and determined by the Appeal Commissioners in the manner provided for in Part 40A

Relevant Date: Finance Act 2021