Capital Acquisitions Tax (CAT) Ireland
Capital Acquisitions Tax Ireland applies to gifts and inheritances. Reliefs like Business and Agricultural Relief can reduce the taxable value of inherited assets, helping to minimize tax liabilities.
Capital Acquisitions Tax (CAT) Ireland
CAT applies to the value of a gift or inheritance received by an individual. The tax rate is 33% as of 2024, but the amount of CAT an individual must pay depends on the value of the gift or inheritance they receive and the relationship between the person giving the gift (the donor) and the recipient.
Thresholds: The amount that can be received without incurring CAT tax depends on the relationship between the donor and the recipient. These thresholds are divided into three groups:
- Group A: Children (including adopted children and stepchildren) – the threshold is €335,000.
- Group B: Siblings, nieces, nephews, etc. – the threshold is €32,500.
- Group C: All other relationships – the threshold is €16,250.
If the value of the gift or inheritance exceeds the threshold for the applicable group, the recipient must pay CAT at the rate of 33% on the amount over the threshold.
Allowable Write-offs or Deductions in Ireland
Below are some key deductions and reliefs that can reduce the taxable value of a gift or inheritance for Capital Acquisitions Tax (CAT) purposes:
1. Debts of the Deceased
The debts owed by the deceased at the time of death can be deducted from the total value of the estate.
This includes:
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Funeral costs
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Medical or care expenses
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Outstanding loans or liabilities
2. Business Relief
If the inheritance includes a business or shares, Business Relief may apply—reducing the taxable value of qualifying business assets by up to 90%.
Eligible assets include:
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Shares in a family-owned company
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Land or buildings used for business purposes
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Certain goodwill or intellectual property
3. Agricultural Relief
For agricultural properties, Agricultural Relief can reduce the taxable value by up to 90%, provided:
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The land was used for farming for a qualifying period before transfer
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It continues to be used for farming afterward
4. Dwelling House Exemption
A dwelling house may be exempt from CAT if:
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The beneficiary lived in the property for at least three years before the gift or inheritance
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They continue living there for at least six years afterward
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The beneficiary does not own or have an interest in another property
5. Business Relief
If a gift or inheritance is provided for the maintenance or support of a dependent family member (such as a spouse, child, or relative), it may qualify for partial or full exemption from CAT.
Additional Considerations
- Gifts between spouses or civil partners: Gifts or inheritances between spouses or civil partners are exempt from CAT, regardless of the value.
- Exemption for Small Gifts: A person can receive small gifts each year up to €3,000 from any donor, and these gifts are exempt from CAT. This exemption can be used multiple times from different donors in one year.
Relief for Certain Expenses
The costs related to a gift or inheritance, such as professional fees for valuing the estate, legal fees, or costs related to the transfer of property (like conveyancing or stamp duty), are not directly deductible for CAT purposes. However, some expenses, such as funeral costs, may be deductible from the value of the estate.
In conclusion, allowable write-offs in Ireland for capital acquisition tax include debts, certain business and agricultural reliefs, exemptions for family homes, and small gift exemptions. Always consider professional tax advice for specific situations to ensure the correct application of tax reliefs and deductions.
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