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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.

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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.

Capital Acquisitions Tax (CAT) In Ireland

Allowable Write-offs or Deductions in Ireland

The following are some of the key allowable deductions or write-offs that may apply to reduce the taxable value of a gift or inheritance for CAT purposes:

  • Debts of the deceased: The debts of the deceased at the time of their death can be deducted from the value of the estate before calculating CAT. This includes funeral costs, medical expenses, or any outstanding liabilities (such as loans).
  • Business Relief: If the inheritance involves a business, certain business assets can qualify for Business Relief, which allows a reduction of up to 90% of the market value of the business assets. This relief can apply to:
    • Shares in a family company.
    • Land and buildings used in the business.
    • Certain types of goodwill and intellectual property.
  • Agricultural Relief: Agricultural Relief can reduce the value of agricultural property for CAT purposes by up to 90%, provided specific conditions are met, such as the land being used for farming for a certain period before and after the transfer.
  • Exemption for Dwelling House: A dwelling house may be exempt from CAT if the recipient has lived in the property for at least three years before the gift or inheritance, and continues to reside there for at least six years after receiving it. There are other specific conditions, such as the recipient not having other significant property or wealth.
  • Maintenance and Support of Family Members: If the gift or inheritance is used for the support and maintenance of a family member (such as a dependent spouse or child), this may qualify for a write-off or exemption.

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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