Q. I am purchasing land in Mayo from a non resident. He has told me that I don’t have to withhold tax from the payment. I think that he is wrong. What is the correct position?
A. Where any of the following assets are sold, the person purchasing must deduct capital gains tax at 15 per cent from the payment:
(a ) Land in the State.
(b ) Minerals in the State.
(c ) Exploration rights in a designated area.
(d ) Unquoted shares deriving their value or the greater part of their value from assets at (a ), (b ) or (c ).
(e ) Unquoted shares accepted in exchange for shares deriving their value or the greater part of their value from assets at (a ), (b ) or (c ).
(f ) Goodwill of a trade carried on in the State.
The deduction is not required where the consideration does not exceed €500,000 in respect of disposals on or after January 1 2002 or where the person disposing of the asset produces a certificate from the Revenue Commissioners exempting the sale from withholding tax. It is relatively easy for a clearance certificate to be obtained.
The vendor of the land must make an application on form CG50 to the Revenue Commissioners accompanied by a copy of the agreement or contract for sale. In the case of a non resident, he or she must also send in a CGT computation plus a payment for the CGT.
However clearance must be obtained before the consideration is paid because failure to obtain the certificate will lead to your being assessed to capital gains tax for an amount of 15 per cent of the consideration. You should instruct your solicitor to include the obtaining of a clearance certificate as a pre condition to closing.