Last updated: February 2025 | Applies to: Republic of Ireland
You've spent years building something. Growing the revenue, managing the staff, sweating the cash flow, staying on top of VAT and CRO filings. And somewhere in the back of your mind, there's a number. A sale price. The thing all of this is eventually working towards.
Here's the uncomfortable truth: most Irish small business owners don't think about Capital Gains Tax until the offer is already on the table. By then, it's often too late to do anything useful about it.
Entrepreneur Relief, officially called Revised Entrepreneur Relief, can reduce your CGT rate from 33% down to 10% on qualifying gains. On a €1,000,000 gain, that's a €230,000 difference. Not a rounding error. Not a technicality. Real money that either stays with you or goes to Revenue, depending largely on decisions you make years before the sale.
This is what you need to understand.
What Is Entrepreneur Relief in Ireland?
Entrepreneur Relief allows qualifying individuals to pay Capital Gains Tax at 10% instead of the standard 33% rate when they dispose of qualifying business assets.
There's a lifetime limit of €1 million of gains at the reduced rate. Gains above that are taxed at the standard 33% CGT rate. The relief applies to disposals of shares in a qualifying company, or to certain business assets used in a trade.
It does not apply to passive investments. It does not apply to property held for rental income. And it doesn't kick in automatically. You have to qualify for it, and qualifying takes time.
Who Actually Qualifies for Entrepreneur Relief?
To qualify, you generally must:
- Own at least 5% of the ordinary share capital of the company
- Have held that shareholding continuously for at least three years in the five years immediately before the disposal
- Be a working director or employee of a qualifying trading company
- Have spent at least 50% of your working time in that business during the qualifying period
In practice, this means you need to be genuinely running the business. Not just listed as a director. Not drawing a nominal salary while you focus elsewhere. Actually working in it, half your time or more, for at least three of the five years before you sell.
Passive shareholders don't qualify. Investors who step back early don't qualify. Owners who dilute below 5% before the exit don't qualify.
What Is a Qualifying Trading Company?
The company must be a trading company, or the holding company of a trading group. That sounds simple enough, but it catches people out regularly.
A trading company is one that actually carries on trading activities. If the company has accumulated significant non-trading assets, such as investment property, cash reserves well beyond what the business needs to operate, or passive investment holdings, that can jeopardise the trading status test.
This is particularly relevant for businesses in the €500k to €2m revenue range that accumulate profits over time or purchase property through the trading entity rather than separately. It's a common structural decision that feels fine in year three and becomes a problem in year eight.
How Much Can You Actually Save?
Real numbers help here.
If you sell your shares and realise a gain of €800,000:
- At 33% CGT: you pay €264,000
- At 10% with Entrepreneur Relief: you pay €80,000
- Difference: €184,000
If your gain is €1,500,000:
- First €1,000,000 taxed at 10%: €100,000
- Remaining €500,000 taxed at 33%: €165,000
- Total: €265,000
- Without relief, the full gain at 33%: €495,000
- Saving: €230,000
These aren't edge cases for large corporate deals. A business turning over €1.5m, growing consistently, could realistically sell for three to five times EBITDA. That puts sale valuations comfortably into the territory where Entrepreneur Relief becomes one of the most valuable financial decisions you'll ever make.
What Mistakes Stop Business Owners Qualifying?
The problems are rarely dramatic. They're technical, and they're almost always avoidable if you look early enough.
Shareholding below 5%. Dilution through investment rounds, restructuring, or bringing in partners can drop ownership below the qualifying threshold. Once it's gone, you can't retrospectively reinstate the relief.
Holding period not met. The three-year continuous holding requirement within the five years before disposal is often misunderstood. If you restructured ownership or moved shares between entities two years ago, the clock may be starting again.
Director in name only. Revenue can and does challenge cases where the working time test isn't met. If you're listed as a director but your time has been primarily in another business or role, that's a problem.
Non-trading assets dragging the classification. Businesses that hold investment property, large surplus cash, or passive income-generating assets alongside their trading activity may fail the qualifying company test. Separation of these assets into a different entity is often straightforward, but it takes time and proper planning.
Late restructuring doesn't fix this. That's the point. These issues need to be identified and addressed years before a sale, not weeks.
Does Entrepreneur Relief Apply to Sole Traders?
Yes, it does. If you operate as a sole trader and dispose of business assets, Entrepreneur Relief may apply provided:
- The assets were used for the purposes of your trade
- The trade was carried on for a continuous period of at least three years
This applies to professional service firms, trades, consultants, construction businesses and others who operate outside a corporate structure. The same principle applies: you must be genuinely trading, and the assets must relate to that trade.
How Does Entrepreneur Relief Compare to Retirement Relief?
They're different reliefs and not interchangeable.
Retirement Relief has its own set of rules, typically age-based thresholds, and can in some cases eliminate CGT entirely, particularly on disposals to children or close family members. For owners selling to family, it often deserves more attention than Entrepreneur Relief.
However, Retirement Relief is more restrictive in certain respects, and for many owners selling to third-party buyers or management teams, Entrepreneur Relief is the relevant mechanism. Which one applies, and whether both might apply in some combination, depends on the specific circumstances and should be reviewed with a qualified accountant before any deal progresses.
What Should You Do if You're Taking on Investment?
This is where owners in the growth phase of their business need to pay close attention.
Outside investment often involves share issuance that dilutes existing shareholders. If your stake drops below 5%, relief is potentially lost. That doesn't mean you shouldn't take investment. It means the structure of that investment, including share classes, timing, and the ownership positions that result, should be discussed with your accountant before anything is signed.
It's a surprisingly common oversight. An owner raises a funding round, takes on a strategic investor, and only later realises their qualifying shareholding has fallen below the threshold. At that point, the options are limited.
Does Entrepreneur Relief Apply Automatically When You Sell?
No. You must claim it.
Entrepreneur Relief is claimed when you file your Capital Gains Tax return following the disposal. Revenue may review your claim and examine shareholding percentages, duration of ownership, employment status and working time, and the nature of the company's business activities.
Documentation matters. Clarity matters. If your records are inconsistent or your structure is ambiguous, claims can be challenged.
How Should You Prepare Years Before a Sale?
You don't need an aggressive tax plan. You need a clear picture of where you stand.
Start with these questions:
- Do I currently hold at least 5% of the ordinary share capital?
- Have I held those shares continuously for at least three years?
- Is my company clearly a trading company, with no significant non-trading asset exposure?
- Are any surplus assets or investment properties sitting inside the trading entity that shouldn't be?
- Am I genuinely working in the business for at least 50% of my time?
If you can't answer those confidently, that's the starting point. Not because there's a crisis, but because qualifying for Entrepreneur Relief is built over time. The decisions you make now shape what's available to you later.
Frequently Asked Questions
What is the current CGT rate in Ireland? The standard Capital Gains Tax rate in Ireland is 33%. Entrepreneur Relief reduces this to 10% on qualifying gains up to a lifetime limit of €1 million.
Does Entrepreneur Relief apply to investment property? No. It applies to qualifying trading businesses and qualifying business assets, not passive property investments or rental income assets.
Can multiple shareholders each claim the €1m lifetime limit? Yes, provided each individual independently meets the qualifying conditions. The limit is personal, not company-wide.
What happens to gains above the €1m lifetime limit? They're taxed at the standard 33% CGT rate. Planning the timing and structure of a sale can sometimes help manage how gains are realised, but this requires careful advice specific to your circumstances.
I'm planning to sell in four or five years. Is it too early to think about this? No. It's probably about the right time. Qualifying for Entrepreneur Relief depends on your history, not just your intentions. If there are structural issues to address, four to five years gives you room to fix them properly. Two years doesn't always.
Not Sure Whether You Currently Qualify?
Most business owners aren't, until someone actually checks. It takes about an hour to review shareholding history, company structure, asset composition and working time. That review can be worth hundreds of thousands of euros.
If you're building a business with any intention of selling, at any point, this is worth understanding now.
Get in touch today and we'll give you a clear picture of where you stand.