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Entrepreneurs who sell all or part of their businesses should have an easier time accessing a lower tax rate on any profit they make as part of the sale, thanks to a budget change on Tuesday.
The move means entrepreneurs will find it easier to qualify for corporate capital gains tax relief, which provides a reduced CGT rate of 10 percent, compared to a normal 33 percent rate, on earnings. of the disposal of qualified commercial assets. . There is a lifetime limit of € 1 million.
Previously, an entrepreneur had to own at least 5 percent of a business for a continuous period of three years, in the five years immediately prior to the disposal, to be eligible for this relief. However, they must now have owned at least 5 percent during a “continuous three-year period.”
Finance Minister Paschal Donohoe said: “This introduces a greater ability for a person to expand their business without worrying about losing this relief.”
However, those who wish to qualify for this relief will still need to work in the business for three of the five years prior to elimination. This will ensure that the measure does not benefit passive investors, the minister said.
The minister also said he would make a technical amendment Tuesday night to the CGT legislation to address an evasion problem.
No change in CGT rate
However, although the Minister was expected to reduce the normal CGT rate, by 33 per cent, in order to stimulate investment in Irish companies, no such change was noted that day.
Marc O’Dwyer, CEO of Big Red Cloud, said the decision not to do so would have “significant implications” for business investment and job creation during 2021.
“A reduction in the CGT would have ensured a much-needed injection of capital into the sector to facilitate growth and job creation. I would have talked about the government’s commitment to the sector, ”he said.
Similarly, John McGrane of Family Business Network argued that cutting CGT would have been a “mutual benefit” for the treasury and local communities, while Brian Keegan, director of public affairs for Chartered Accountants Ireland, said a reduced CGT temporarily the rate would have generated much-needed tax revenue “from a suppressed appetite for transactions that must remain unsatisfied for now.”
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