Finance Act 2012 - Boost To International Real Estate Investment And Other Business-Friendly Measures

Author:Mr Terence Pay

The Irish Finance Act 2012 has been enacted, giving effect to the measures contained in Finance Bill 2012. These measures further enhance Ireland's reputation as a location of choice for foreign direct investment with a modern 'business-friendly' infrastructure. The Government had previously strongly affirmed the 12.5% Corporation Tax Trading rate into the future.

Real Estate Tax Exemption

The recently enacted Irish Finance Act 2012 contains a significant Capital Gains Tax (CGT) incentive relating to the purchase by an Irish company or individual of any domestic or commercial property located within the EU/EEA. This new incentive will benefit not only domestic investors but will also attract international investors to Ireland, which already ranks as a world location of choice for business operations for its tax regime and ease of doing business.

Details of the Incentive

A special incentive CGT measure is introduced for any EU/EEA-located residential or commercial real estate purchased by a 'person' between midnight on 6 December 2011 and 31 December 2013 If a property is bought during this period and held for at least 7 years, any capital gain relating to that 7-year holding will be fully relieved from CGT. This is very significant, given that the normal rate of CGT on disposals is 30% less any foreign tax credit The legislation clearly applies to the acquisition of real estate not only by Irish resident individuals but also by Irish companies (to quote the legislation in S64 of the Act, the relief is available where the gain will be ''-----income or profits to which the Income Tax or Corporation Tax Acts apply---''). Similarly, if a gain arises in an Irish Limited Partnership where a partner is within the scope of Irish Income Tax or Corporation Tax, the relief will apply The exemption time-apportions the gains. For example, a property held for 12 years will be 7/12 relieved from CGT The property must be acquired for a consideration equal to the market value of the property There are measures to prevent 'contrived arrangements' availing of the relief Real Estate Investment Planning Opportunities

The CGT property relief opens an obvious and significant doorway to optimum planning for Irish companies purchasing real estate in EU and EEA real estate in the EU/EEA.

An Irish company can now function as a tax-free personal real estate investment vehicle for the next seven years, particularly when combined with a tax exemption in...

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