The rate of capital gains tax (CGT) is currently 33% and has been increased four times since 2008. These increases were necessary to protect the yield from CGT in the context of the rebalancing of the public finances. An increase in the taxation of capital is preferable from the point of view of its impact on the economy as compared to an increase in employment taxes such as income tax. In these various circumstances, any reliefs introduced over recent years have had to be targeted and time-bound.
A CGT relief was introduced in Budget and Finance Act 2012 to incentivise the purchase of property between 7 December 2011 and the end of 2013 with the intention of stimulating activity in the property market. The incentive was subsequently extended to property purchased to the end of 2014. I stated recently that this relief will not be extended further as it has served its purpose.
The incentive applies to industrial, farmland, commercial and residential (buy-to-let) property (land and buildings) purchased to the end of this year. If the property is held for more than 7 years, the capital gains attributable to those 7 years will be exempt from CGT on a proportionate basis relative to the period of ownership. Property sold within the 7 year period subsequent to purchase will not qualify for relief.
Relief for farm restructuring was introduced in Finance Act 2013 on disposals of farm land for the purpose of farm restructuring or consolidation. The relief applies to a sale, purchase or exchange of agricultural land in the period from 1 January 2013 to 31 December 2015 where Teagasc has certified that a sale and purchase or an exchange of agricultural land was made for farm restructuring purposes.
Section 45 of Finance (No 2) Act of 2013 provides for a CGT relief for entrepreneurs who reinvest the proceeds from the disposal of assets made on or after 1 January 2010 in certain chargeable business assets. Commencement of the legislative provisions is subject to EU state-aid approval. Discussions with the EU Commission about State Aid clearance are ongoing. I hope that these will result in a positive outcome in the near future. Notwithstanding that the legislative provisions have yet to be commenced, the CGT relief will only apply, among other conditions, where new chargeable business assets acquired after 1 January 2014 and up to end- December 2018 are disposed of having been held for a minimum period of 3 years after acquisition in that period.
I am not in a position to say what the level of investment generated or jobs created by these reliefs will be as, among other reasons, individuals or companies who avail of them are not required to provide that information to my Department or to the Revenue Commissioners. As regards the numbers who will benefit and the cost, the reliefs will be claimed through the tax system under self-assessment. The various reliefs which I have outlined are not long introduced. Moreover, in the case of the property incentive relief, individuals must hold on to any property acquired for a minimum of 7 years in order to claim the relief while the CGT entrepreneur relief has yet to be commenced and qualifying assets under that relief must be held for a minimum of 3 years.