The tax which arises on gifts or inheritance in Ireland is known as capital acquisitions tax. At CPC Accountants we often receive queries from individuals that are resident overseas that suddenly find themselves the beneficiary of Irish assets either by gift inheritance. Their primary concern is whether any Irish or foreign tax arises on the receipt of this gift or inheritance and secondly if there is anything that can be done to mitigate against this liability. We also support non-Irish residents that require advice on the most tax efficient manner of gifting their Irish based assets. We hope this article will provide you with some guidance.
Inheritance Tax in Ireland – when does it arise?
Gifts or inheritances of Irish property are liable to tax whether or not the disponer is resident or domiciled in Ireland. Therefore where the gift or inheritance involves Irish property a tax charge will arise regardless of whether the provider of the gift is resident in Ireland or not. Foreign (not Irish) property is liable to tax where either the disponer or the beneficiary is resident or ordinarily resident in Ireland. Therefore it is important to ensure the residency status over the past three years of both the giver and the beneficiary of the foreign asset is checked and documented at the point that the gift or inheritance is received.
Irish inheritance and gift tax, capital acquisitions tax (CAT) is very high at present. Ireland has one of the highest death and gift tax rates in the world. The commencement of a recovery in the property market has triggered concerns amongst people in Ireland who are considering passing on family homes or investment properties to their loved ones that they could be exposed to large inheritance tax bills. Some are even considering passing any investment properties to their children now, while the recovery in the property market is still in its early stages. This could help their children avoid inheritance tax bills as their son or daughter won’t have to pay any inheritance tax on a property left to them if that property is worth less than €225,000. Further to this parents could save their children significant tax bills by encouraging them to move into any properties they intend to leave to them. As long as their children have been living in the house for at least three years before inheriting the property, and they satisfy other conditions, the children should not have to pay any inheritance tax on the property.
What can I do?
Various exemptions from gift and Inheritance Tax are also available. For example, the first €3,000 taken as a gift by a beneficiary from a disponer in any one year is exempt from tax as are gifts and inheritances taken by one spouse or civil partner from the other. There are exemptions in favour of certain charities, heritage property, superannuation benefits, and foreign donees of certain Irish government securities. Further to this qualifying insurance policies to the extent that they are utilised in the payment of certain Gift Tax or Inheritance Tax are also exempt. A dwelling house as mentioned above taken as a gift or inheritance is also exempt in certain circumstances.
If you are concerned that you could be facing a large inheritance or gift tax bill in Ireland or if you are planning your will and need to seek advice on the most tax efficient of gifting assets to your beneficiaries please contact our tax team today to arrange an appointment. They can be contacted by emailing firstname.lastname@example.org