Dominic Coyle answers your financial questions.

Capital gains tax on foreign shares

I have searched through the Revenue Commissioners site for information on one particular aspect of capital gains tax with no luck. Was CGT tax applicable to trades on shares in the US, Europe and in Britain? If it is, is it applicable at the same rate as in Ireland (ie 20 per cent after your €1,000 tax free allowance)? Does the exchange rate of the currency at the time come into it as well? Any information that you could offer would be of great assistance.

Mr M.B., email

I imagine you might well search in vain for the type of information you are seeking on the Revenue site because you are approaching the issue from the wrong viewpoint. The relevant issue in terms of capital gains - and indeed other elements of the tax code - is where you reside rather than where the transactions took place.

Assuming you are resident in Ireland - for tax purposes at least - then you will be obliged to pay capital gains tax on any relevant investment to the Irish Revenue Commissioners. That is so whether the assets you are buying are shares bought in the London market, in the US or Europe.

As such, the relevant rate will be 20 per cent on any gains over and above your annual CGT exemption of €1,270, not €1,000.

Exchange rates do come into it when you are talking about deals conducted outside the euro zone. You will need to ascertain the relevant exchange rate with the euro - or the punt for older transactions - on the dealing dates, both when the shares were bought and sold.

Finally, do bear in mind that you will be able to apply an indexation multiple to account for the impact of inflation at least up to the end of 2002, when it was abolished.

Stamp duty relief

I signed a contract as a first-time buyer to buy a new house in May of 2005. The house is in the course of construction and the purchase is expected to close in April 2006.

In the meantime, I have been offered a career development opportunity abroad for a period up to February 2007. If I don't let the house and occupy it as a first-time purchaser in 2007, will I still be exempt from stamp duty?

Ms S.McC., email

The two key elements of the stamp duty relief for first-time buyers are that it must be your principal private residence and you must not rent it out or sell it for the first five years of ownership.

The fact that you are availing of a short-term career development opportunity abroad will not preclude the property from being your principle private residence. As long as you do not rent out the property and occupy it as your home on your return, I do not see how you will be liable to stamp duty clawback.

Tax on ARFs

There has been little comment on the Budget proposal to phase in a 3 per cent annual imputed taxable drawdown from all (post 2000) ARFs.

I retired aged 60, three years ago, and opened an ARF fund (actually split into three funds with different companies). But it appeared likely then that the returns would be much less than I had earlier optimistically planned for. So I took up PAYE employment and have not drawn down any income from the ARF, the plan being to let them build up for a few years.

Must I now draw down annually 3 per cent of the value of the total ARF? Must it be from each of my three separately managed funds or could it all be taken from one of those funds? If it can be left there, albeit after tax has been deducted, would it make more sense to do so or to take it out to re-invest it in another fund, fund performance being assumed equal?

Mr J. K., email

You are right when you say the Minister for Finance's move to apply an imputed tax on Approved Retired Funds (ARFs) has drawn little comment.

The measure, which has yet to be confirmed - as must all Budget measures in the passage of the Finance Bill through the Oireachtas - will apply to all ARFs created after April 6th, 2000.

When it is fully operational, you are right that you will have to withdraw a minimum of 3 per cent from the fund each year - on which you will pay tax at your marginal rate - or the Government will impose tax at that marginal rate on a notional 3 per cent drawdown. The Government thinking is that the fund is designed to be used in retirement without the rigidity of investing in an annuity and is not an investment to be stockpiled for tax advantage with the Revenue forgoing the tax it would receive on pension payouts.

If you draw nothing down and pay the tax on the notional 3 per cent, that money will again be taxed when you do draw it down.

It is as yet unclear how the tax will work but it is likely that each ARF fund will be treated individually and therefore you are likely to come under pressure to withdraw separately 3 per cent of each fund annually.

It is worth noting that Mr Cowen envisages transitional arrangements under which no tax will be imposed on "notional" withdrawals until 2007. At that point the tax will be phased in, with 1 per cent of funds facing a tax charge in 2007, 2 per cent in 2008 and the full 3 per cent in 2009.

You should also be aware that Approved Minimum Retirement Funds (AMRFs). These relate to the first €63,500 of an individual's accumulated pension fund which - unless you have a guaranteed annual pension income for life of €12,500 - must be ring-fenced in an AMRF until you reach the age of 75 before being transferrable to an ARF.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.