Capital Acquisition Tax (CAT)
What is Capital Acquisitions Tax (CAT)?
CAT is tax you pay when you receive a gift or an inheritance. CAT comprises two separate taxes - a Gift Tax, payable on lifetime gifts and an Inheritance Tax payable on inheritances received on death. It is the person receiving the gift or inheritance who is liable to CAT and not the person or estate providing the benefit.
How is it charged?
With effect from 1st December 1999, a charge to CAT will arise where either the disponer (The person giving the asset) or the beneficiary (the person receiving the asset) is resident or ordinarily resident in the State at the Date of the Gift or Inheritance
Where both the disponer and the beneficiary are not resident or ordinarily resident in Ireland, a charge to tax would only arise in relation to Irish Property
What is the tax rate?
33% is the current rate of tax on gifts or inheritances received by the beneficiary.
Source CAT consolidation Act 2003 (as updated by subsequent Finance Acts)
Can you get any amount tax free?
The amount a beneficiary can receive tax free depends on their relationship to the disponer.
The threshold amounts are those applying with effect from 10th October 2018.
Source CAT Consolidation Act 2003 (as updated by subsequent finance Acts)
Is that tax free amount per gift and per inheritance?
No. The tax free threshold amount is the total amount you can receive tax free in your lifetime, from each different ‘group’. Under the current rules (called aggregation rules) all benefits from Group 1 will be added together with an overall threshold of €320,000. Benefits from Group 2 members (brother, sister, grandparent etc) will be added together for the purpose of the €32,500 threshold, and benefits from Group 3 members (strangers) for the purpose of the €16,250 threshold. So in effect a beneficiary can potentially receive up to €368,750 tax-free if the benefits come through different “groups”.
Is tax payable on everything you receive as a gift or inheritance?
While tax is payable on all assets you receive certain reliefs and exemptions apply to certain types of assets. The main reliefs are:
Agricultural Relief – the value of farmland, buildings and stock can be reduced by 90% where the beneficiary is a qualifying farmer and holds the property for a minimum of 6 years.
Business Relief – can provide a similar reduction of 90% in the value of certain businesses or private companies, where both the business and the beneficiary meet certain conditions.
Family Home Exemption – exemption from Gift and Inheritance Tax is available on the value of certain “dwellings” with up to an acre of land where the disponer and the beneficiary meet certain conditions.
Life Assurance Relief – the proceeds of life assurance plans, where the plan was effected specifically for the payment of Inheritance Tax or the tax payable on the value of an Approved Retirement Fund (ARF) inherited by a child over the age of 21, will not be subject to Inheritance Tax – provided the money is actually used to pay the relevant tax bills.
This ‘Life Assurance Relief’ is commonly referred to as ‘Section 72 Relief’