Capital Acquisition tax in Ireland includes both gift tax and inheritance tax. The tax is chargeable on inheritance or gifts—and all properties located within Ireland. It is also applicable where the giver or receiver is resident in Ireland for tax purposes even if the property concerned is not in Ireland.
Gift tax
According to the Irish tax laws, when you receive a gift, you may be liable to gift tax depending on the value of the gift—if it is valued above a specified threshold. The limit on the value of tax applicable depends on the relationship between the giver and the receiver. For instance, if you receive a gift or inheritance from your civil partner or spouse, you are exempted from paying Capital Acquisitions Tax
The value of the gift is the market value applicable on the day it is given. Every year the first gifts valued at €3,000 received are not liable for taxation.
Inheritance tax
Receiving an inheritance in the event of death makes you liable for inheritance tax. The value of the inheritance tax will vary depending on the relationship the receiver has with the deceased—this may include some exemptions. As mentioned earlier, the value of the gift is normally calculated the day it is received from the receiver.
Tax rate
The taxable value of a gift or inheritance is calculated at its market value, at the time it is received with deductions made for other expenses and debts to be exhausted in order to take up ownership. Capital Acquisitions Tax is charged at 33% on both gifts and inheritances on amounts above the stipulated limits on value.
Exemptions
The limit on value up to which gifts and inheritance are tax-free is based on how the relationship between the giver and receiver is categorized. Group A mainly consists of children who receive gifts or inheritance from their parents. Parents who receive an inheritance from their children and are given full and complete ownership also fall under this group.
Parents who receive an inheritance from their child but do not have full and complete ownership fall under group B. When the receiver is a blood relation such as a grandparent or a sibling the relationship also falls under this group.
Group C is made up of other relationships not covered in the other two groups.
Gifts and inheritance originating from a spouse or a civil partner do not beget Capital Acquisition Tax. Payments for damages or compensation and winnings from the lottery are excluded from taxation. When the benefits received are used to foot medical expenses or for charity no tax is applicable. A gift or inheritance of a house is not taxed provided it is the receiver’s main residence and they do not own another house.
Reliefs
Business and agricultural relief for gifts and inheritance facilitates a reduction in taxable value by up to 90% of market value. Heritage property received is also exempted from paying tax subject to certain conditions.
Making a return and paying Capital Acquisitions Tax
A tax return must be filed for gifts and inheritance received. For receivers from outside Ireland, getting a solicitor to attend to the filing will enable you to take full ownership of the inheritance. Tax returns can be filed online. Gifts or inheritance with a valuation date in the 12-month period ending on the 31 August must be paid and submitted by 31 October. A surcharge will be applicable in the event of late payment. Special circumstances allow for one to pay the Capital Acquisitions Tax in installments if the receiver is not in full ownership of the benefit.
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