CAPITAL ACQUISITIONS TAX
MALONE & CO.
Capital Acquisitions Tax (CAT) arises on the gift or inheritance of an asset. The amount of CAT to be paid varies depending on the relationship between the beneficiary (person receiving the gift or inheritance) and the person who provided the gift or inheritance (disponer). The gift/inheritance is valued for CAT purposes on the date the beneficiary becomes entitled to it. The total amount of the gift/inheritance taxable is the market value minus allowable deductions for example funeral expenses (in the case of an inheritance), legal costs or any debts which must be paid by law.
The level of CAT owed to the revenue will depend on the relationship between the disponer and the beneficiary. Any gift or inheritance received that exceeds the beneficiary’s group tax exemption threshold is taxed at the rate of CAT which is now 33%. The tax exemption thresholds are as follows:
Post 10.10.18 Threshold
Group A – Son/Daughter (including step child or adopted child), Parents, in cases of inheritance of disponer.
Group B – Brother/Sister, Niece/Nephew, Parent, Grandchild/Great Grand Child of disponer.
Group C – Any relationship to disponer not included in Group A or Group B
The beneficiary of the gift/inheritance is responsible for ensuring that any CAT owed is paid and returned to Revenue by a specified date. If you are non-resident then you must appoint a third party, such as a solicitor or accountant to take responsibility for the payment of CAT to the Revenue.
It is worth noting that if the total value of gifts and inheritances exceeds 80% of the relevant group threshold received by a beneficiary, the beneficiary must file a CAT return (Form IT38). This obligation applies even though there is no CAT liability arising.
Subject to certain conditions, there are a number of exemptions from CAT as follows:
- Gifts or inheritances between spouses.
- The first €3,000 of taxable gifts from one individual to another in a calendar year.
- Payments for damages or compensation.
- Inheritance of a dwelling house which is your main residence subject to certain conditions.
- Benefits received for charitable purposes.
- Business Relief – applies to gift or inheritance of business property.
- Agricultural Relief – applies to gift or inheritance which consists of agricultural property such as land or machinery.