Your recent article on capital gains was most helpful. However, I am puzzled as it seems that it would be convenient for an elderly person to transfer such shares to a son, a transfer which I believe is only subject to a 1 percent stamp duty on the securities. current. The son could sell them but the capital gain then seems to be limited to the capital gain from the date he obtained them from his father until the date of the final sale outside the family.
This way no or little capital gains tax is payable, whereas if the paternity had sold them it would have been subject to tax. Seems too easy a way to avoid or drastically reduce the CGT payment !?
Additionally, if the father lived abroad, for example in Italy, where he could, he could choose to make the transfer to his son either through the company’s usual broker in Ireland or through the intermediary of the registered office of this broker in the United Kingdom where the son lives. Would the father or son be taxed by this choice or would Irish or UK stamp duty only be due?
Mr M.O’C., Email
The article you are referring to was a strange situation where the father thought he was saving the heirs a capital gains tax bill by selling shares with a gain now (and, in his case, offsetting them with loss-making actions). In my answer the point was that the capital gains for the heirs were not a problem as they die with the holder of the asset (and therefore the father should only sell on the basis of the expectation of the future direction of the price of the shares in question).
Thus, on the death of the father, the capital gains accumulated under his property are discounted by the tax authorities and the estate / heirs receive the shares at their value on his death without any tax consideration on the capital gains.
But if he sells them while he is alive, he must be worried about a capital gains tax problem.
And the same is true if he simply transfers them to the son. A transfer is equivalent to a sale in terms of capital gain. This is a change of owner and crystallizes any added value.
So if we are talking about Ireland, the transfer of the shares to the son will cost 1% stamp duty on the transfer, but will also leave the father facing a 33% capital gains tax bill on the transfer. any gain in value of the shares. between the time he acquired them and the time of the sale – minus the annual exemption of € 1,270 on capital gains tax unless he has already used this exemption on other transfers of assets this year.
To live abroad
But then you introduce another complication. In this case, if I understand correctly, neither the father nor the son are currently resident in Ireland. Depending on their status, this also affects position.
Essentially, Capital Gains Tax is levied on worldwide gains for people who are resident or ordinarily resident in Ireland and are domiciled there. For those who are not domiciled there, tax is only levied on capital gains on Irish assets and on proceeds brought into Ireland on sales of foreign assets.
To be tax resident here, you must have spent more than 183 days in the state in that tax year, or 280 days in the current and previous tax year (with at least 30 days in the State for each of the years).
Ordinary residence is different. It generally covers temporary periods spent abroad. If you have been a tax resident here for three years, you become an ordinary resident at that time. You keep this tax residence for three tax years after the year of your departure from the country.
Home is a more permanent thing and is usually, but not always, your place of birth.
However long you stay in Italy and your son in London, you will likely be domiciled in Ireland.
If you are subject to capital gains in Ireland, the rate will be as above. If Italian tax law applies to you, the capital gains tax rate is, as I understand it, 26%.
Your son only has to worry about capital gains tax when he eventually sells the assets you plan to transfer to him. If at that time it is subject to UK tax law
Currently, he would benefit from a capital gains allowance of £ 12,300 (€ 14,350). On any amount over that, he would pay 10% if, including the capital gain, he stayed within the Basic Income Tax limits or 20% if it took him to the highest tax limit. high – or he already pays tax at the highest rate. rate.
That would be higher if he sold a physical residential property – 20 and 28 percent at current rates.
Regarding stamp duty, selling in Ireland or the UK will affect the stamp duty rate but will have no impact on capital gains. This will be determined by the tax regime to which either of you, as an individual, responds.
Please send questions to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email [email protected] This column is a reading service and is not intended to replace professional advice. No personal correspondence will be exchanged