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If you receive a gift, you may have to pay gift tax on it. If you receive an inheritance following a death, it may be liable to inheritance tax. Both these taxes are types of Capital Acquisitions Tax.

Unlike in the UK, Inheritance Tax (Capital Acquisitions Tax) in the Republic of Ireland is a tax on the Beneficiary not on the Estate of the deceased person.

The tax is charged on the taxable value of the inheritance.

Once the taxable value of the inheritance has been determined, the amount of tax payable will depend on whether the appropriate tax free threshold (“Threshold Amount”) has been exceeded.

Gifts and inheritances can be received tax-free up to a certain amount.

The tax-free amount, or threshold, varies depending on your relationship to the person giving the benefit. There are three different categories or groups. Each has a threshold that applies to the total benefits you have received in that category since 5 December 1991.

The rates of tax in Ireland are as follows – thresholds set out the limits on all gifts and inheritances received since 5^th December 1991, where CAT becomes payable at 33%.

Source www.revenue.ie

The tax rate for Capital Acquisitions Tax:

Capital Acquisitions Tax is charged at 33% on gifts or inheritances made on or after 5 December 2012 (the rate was formerly 30%). This only applies to amounts over the group threshold. For example, if you have received gifts from your parents with a taxable value of €550,000, you only pay tax on the amount over the appropriate group threshold (Group A threshold from 12 October 2016: €310,000). So €240,000 is taxed at 33%.

Depending on certain criteria, the tax may also be payable on gifts or trusts made during that person’s life.

Possible ways to mitigate tax payable.

We strongly recommend you always discuss options with your legal, tax advisor and financial advisor (Nelson Life 091 44 88 or office@nelsonlife.ie )

The main reliefs for CAT include:

Gifts or inheritances from a spouse or civil partner

Dwelling House exemption: http://www.revenue.ie/en/tax/cat/leaflets/cat10.html

The Section 72 policy is a very sensible choice to cover potential CAT liability if there is a substantial liability over and above the normal threshold A for a child.

Business relief: http://www.revenue.ie/en/tax/cat/leaflets/cat4.html

Small gits exemptions :You may receive a gift up to the value of €3,000 from any person in any calendar year without having to pay Capital Acquisitions Tax (CAT). This means that you may take a gift from several people in the same calendar year and the first €3,000 from each disponer is exempt from CAT. This small gift exemption applies only to gifts and not to inheritances.

The following are also exempt from Capital Acquisitions Tax:

Payments for damages or compensation

Benefits used only for the medical expenses of a person who is permanently incapacitated due to physical or mental illness (pdf)

Benefits taken for charitable purposes or received from a charity

Winnings from a lottery, sweepstake, game, or betting

Retirement benefits and pension and redundancy payments are not usually liable to Gift Tax. If the employee however is a relative of the employer, or the employer is a private company and the employee is deemed to control the company, Revenue may disallow this exemption if they consider the payment excessive.

Reasonable support for the maintenance or education of a child or spouse/civil partner.

Warning: The information contained in this document is based on our understanding of current tax legislation and the current Revenue Commissioners interpretation thereof and is subject to change including retrospectively without notice. This is intended as a general guide only and is not a substitute for individual tax or investment advice. 

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