Inheritance Tax / Gift Tax (CAT)

Gift tax is charged on taxable gifts taken and Inheritance tax is charged on taxable inheritances taken. Together these taxes are known as Capital Acquisitions Tax (CAT). An inheritance is a gratuitous benefit taken on a death and a gift is a gratuitous benefit taken otherwise than on a death.

The tax is charged on the taxable value of the gift or inheritance. The taxable value is arrived at by calculating the market value of the property comprised in the gift or inheritance and deducting specific allowable amounts and any consideration paid by the beneficiary.

Once the taxable value of the gift or inheritance has been determined, the amount of tax payable will depend on whether the appropriate threshold amount has been exceeded.

The relationship between the person who provided the gift or inheritance (the disponer) and the person who received the gift or inheritance (the beneficiary) determines the maximum tax free threshold – known as the “group threshold”.

Group Threshold

Year

Group Threshold A
son/daughter, minor child

of deceased child,

(parents –unlimited inheritances only)

Group Threshold B
E.g. parent, brother, sister,

niece, nephew, grandchild

Group Threshold C
relationships that do not

fall in Group A or B

2008 €521,208 €52,121 €26,060
1/1/09 - 7/4/09 €542,544 €54,254 €27,127

8/4/09 - 31/12/09

€434,000

€43,400

€21,700

1/1/10 - 7/12/10

€414,799

€41,481

€20,740

8/12/10 - 6/12/11

€332,084

€33,208

€16,604

7/12/11 - 5/12/12 €250,000 €33,500 €16,750

6/12/12 - 13/10/15

€225,000 €30,150

€15,075

on or after 14/10/15 €280,000 €30,150 €15,075

 

The Threshold Amount is calculated by reference to the aggregate of all taxable inheritances and taxable gifts taken within the same group threshold after 5th December 1991.

Rate of Tax

Where the Threshold Amount has been exceeded, the rate of CAT applied depends on the date the benefit was taken.  The following rates apply in respect of benefits taken since 2008.

Date of Benefit Threshold Amount Balance at
2008 0% 20%
1/1/09 -  7/4/09 0% 22%
8/4/09 -  6/12/11 0% 25%
7/12/11 - 5/12/12     0% 30%
From     6/12/12 0% 33%

 

Payment of CAT and Filing of CAT Return
CAT is charged on a self assessment tax basis and is payable by reference to the Valuation Date, that is, the date on which the beneficiary is beneficially entitled to the benefit (as defined in legislation). The payment and filing date for CAT is the 31 October following a Valuation Date arising between 1 September and 31 August. For example, where the Valuation Date falls between 1 September 2012 and 31 August 2013, the CAT is payable and the relevant return must be filed on or before 31 October 2013 or else interest, penalties and surcharges would be applied.

Main Exemptions

The first €3,000 of taxable gifts by an individual to the same individual in a tax year (calendar year) are exempt.

Gifts and inheritances between spouses.

Transfers of property by virtue of any order in relation to a separation or a divorce.

A gift or inheritance consisting of a dwelling house that is the only or main residence of the beneficiary subject to conditions. Revenue's interpretation of this relief is available here.

Main reliefs

Business relief: a 90% reduction in the market value of a benefit can be applied if the benefit consists of relevant business property (such as unincorporated businesses or shares in certain family companies) where certain conditions are met. Revenue's interpretation of this relief is available here.

Agricultural relief: a 90% reduction in the market value a benefit can be applied if the benefit consists of agricultural property (such as agricultural land, livestock and machinery) where certain conditions are met. Revenue's interpretation of this relief is available here. This has been changed significantly in Finance Act 2014.

Territoriality
Gifts or inheritances of Irish property (whether moveable or immoveable) are liable to tax whether or not the disponer is resident or domiciled in Ireland. Foreign property is liable to tax where either the disponer or the beneficiary is resident or ordinarily resident in Ireland at the relevant date.  There are only two double taxation treaties in place for Irish CAT, with the United Kingdom and with the USA. A more limited unilateral relief is however also available for similar taxes arising in other jurisdictions.

Discretionary Trust Tax / Levy
A once-off levy applies to property becoming subject to a discretionary trust. The current rate of tax is 6%. In certain cases the 6% rate can be reduced to 3%. This tax is payable within 4 months of when the charge arises

An annual levy at the rate of 1% applies to property subject to a discretionary trust on 31 December in each year.

At present the levy becomes payable on the latest of the following events:

the date the property is placed in trust

the date of death of the settlor

the date on which the youngest principal object of the trust attains the age of 21.

Various guides to CAT are available from Revenue here.

The method of payment of CAT by agents holding a digital certificate but who do not hold a client account (non solicitors) has limitations. In lieu of payment via ROS (the Revenue online service) payment of CAT can be made by Electronic Funds Transfer where the agent holds a digital certificate and files the return online via ROS. The Revenue must in such a case also be emailed as soon as the payment is made to allow the matching of the payment. It is also possible to pay by Debit card via ROS but this may be subject to bank transaction limits.

 

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Aileen Keogan | Solicitor & Tax Consultant | 21 The Avenue | Louisa Valley | Leixlip | Co. Kildare | Ireland

Tel: +353 1 624 7345 | Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

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