Capital Acquisitions Tax An unusual feature of Irish capital acquisitions tax/gift/ inheritance tax is that it looks at the receipt by the donee/recipient rather than the giving by the donor/deceased. The relevant allowances are measured with reference to the donee. Accordingly, by making gifts to a wider class of persons, the overall inheritance tax liability is reduced. A gift arises […]
Calculation of Capital Acquisitions Tax Capital Acquisitions Tax, whether gift or inheritance tax, is paid on the taxable value of the gift or inheritance. The taxable value is the market value reduced by deductible costs, liabilities and expenses and by consideration paid in money or money’s worth. The incumbrance-free value is the market value on the valuation date less than […]
Overview Gift and inheritance tax is charged on the value of the gift or inheritance received. It is the price which those assets might reasonably be expected to obtain on a sale in the open market subject to such conditions as might be calculated to obtain for the seller the best price. The best price is generally understood to be […]
Significance The valuation date is the date on which the value of the property and assets is established. It determines which date the tax is payable and when the CAT returns are due to be filed. Where the valuation date is: between 1 January and 31 August, the pay and file deadline is 31 October in that year between 1 […]
Free Use of Asset The free use of an asset is charged to give tax on its annual value. Where the person is allowed the free use of the assets, he is deemed to have the annual value if he, in fact, has the use of the asset without any entitlement to any interest in it. If he is, in […]
Basic Exemption The dwelling house exemption has existed for over twenty years. It has been subject to significant amendments. Since 2016, the exemption for lifetime gifts has been severely restricted. The conditions for exemption in the case of inheritances are that at the date of the inheritance: the house was the only or main home of the deceased disponer (this […]
Spousal Exemption There is a complete exemption for gifts or inheritances between spouses and civil partners. This has not always existed. When the CAT was first introduced, spouses were in the equivalent of Group A. As of 30th January 1985, all inheritances became exempted. As of 31st January 1990, all gifts became exempted. Transfers between former spouses after divorce, pursuant […]
Reliefs This chapter deals with miscellaneous reliefs from capital acquisitions tax. There are a number of CAT reliefs. A relief generally requires compliance with conditions and must be claimed. An exemption applies automatically once the relevant terms and conditions apply. See the separate chapter on exemptions. Other sections look in detail at two major reliefs, namely that applicable to agricultural property […]
Overview Since the introduction of capital acquisitions tax, a relatively generous agricultural property relief has been available. The primary purpose has been to alleviate the inheritance tax burden that might otherwise apply to the inheritance of a family farm. Agricultural relief gives a 90 percent reduction in the taxable value of the property/assets concerned. There is a 90 percent reduction […]
Relief Granted Business relief has the effect of reducing the value of certain qualifying trading business assets by 90 percent for CAT purposes. The effect of this 90 percent reduction is that a significant amount of property could qualify for exemption from CAT. Where tax applies, the rate is effectively reduced from 33 percent to 3.3 percent. Calculation the taxable […]
Qualifying Business Assets There are various categories of qualifying (called “relevant”) business property a business (e.g. sole trader) interest in a business (e.g. partnership) unquoted shares giving the beneficiary more than 25 percent of votes in the company unquoted shares giving 10 percent of the share capital for a beneficiary employed certain lands, buildings, machinery and plant used for the […]
Pension Schemes Bona fide payments to an employee or former employee out of funds provided by the employee or certain others by way of retirement benefit, redundancy payment or pension are not deemed inheritances. Benefits taken by widowed or widowers are exempt, or if taken by other dependents, will have the same threshold of the relationship between the beneficiary and […]
Overview The CAT legislaiton provide that the proceeds of life insurance policies, taken out expressly to pay CAT, are exempt from tax provided certain conditions are satisfied. For the inheritance tax exemption, the main condition is that the inheritance must be taken on or after the death of the insured person and not later than one year after this death. […]
Unilateral Relief Double taxation agreements are very limited in relation to inheritance tax applying to U.S. and UK principally. Unilateral relief may be given only where double taxation relief is not available. Unilateral relief may be granted where an inheritance or gift is subject to Irish CAT and is also subject to a foreign capital tax equivalent such as estate […]
Discretionary Trust Where assets are subject to a discretionary trust as defined, there is a once-off 6 percent charge and an annual charge after that. The tax is applied on the date when the assets become subject to a discretionary trust (in the sense defined) at the date of death of the person creating the will/trust or when, if later, […]
Liable Person A person who takes a gift or a benefit by way of inheritance is potentially liable to pay capital acquisitions tax. The primary obligations rest on the donee, the transferee or successor. Any person who is liable to pay capital acquisitions tax, whether inheritance tax, gift tax or discretionary trust levies must deliver a full and true return […]
Powers of Revenue The Revenue has extensive powers in the CAT Act supplementing their general Tax Consolidation Act powers. They have powers to seek additional evidence, make enquiries and inspect documents. They can require an accountable person to deliver and verify a statement of particulars relating to assets and such evidence as they believe require in relation to that is […]
Overview The Revenue has the usual methods and means of enforcement available for the collection of inheritance tax. See the sections on tax administration generally. Interest applies on unpaid taxes. The daily rare is 0.0219% . This is in addition to penalties and surcharges. Interest on overpaid tax applies within four years of the due date. A specified rate of […]