Capital Acquisitions Tax

Capital Acquisitions Tax

Capital Acquisitions Tax (CAT) is a tax on gifts and inheritances (benefits) received by individuals (beneficiaries) from other individuals (donors).

The gift or inheritance is taxed if its value is over a certain limit or threshold. Different tax-free thresholds apply depending on the relationship between the disponer (the person giving the benefit) and the beneficiary (the person receiving the benefit) The current CAT thresholds (from the 9th October 2019) are set out below:

 

Group A: €335,000Applies where the beneficiary is a child (including adopted child, step-child and certain foster children) or minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an inheritance of an absolute interest from a child.
Group B:
€32,500
Applies where the beneficiary is a brother, sister, niece, nephew or lineal ancestor or lineal descendant of the disponer.
Group C:
€16,250
Applies in all other cases.

CAT is currently charged at 33% on gifts or inheritances over the group threshold. For example, if you received a gift from your parents with a taxable value of €500,000.00 you will only pay tax on the amount over the relevant group threshold. (Group A Threshold is currently €335,000.00) So the balance of €165,000.00 is taxed at 33%

Exemptions

The following are exemptions from CAT:

  • Gifts or inheritances from a spouse or civil partner
  • 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.
  • 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. However, if the employee 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 or civil partner.
  • Small gift exemption of €3000.00 received from any person in any calendar year is exempt. The exemption only applies to gifts and does not apply to inheritances.
  • Dwelling House Exemption applies where an individual has been living in a dwelling house for a period of three years and is gifted or inherits the dwelling. They receive the dwelling free from CAT and in addition the gift or inheritance is not taken into account for future aggregation purposes. There does not need to be a blood relationship between the donor and beneficiary, however, additional conditions do apply.

Reliefs

Business Relief: Gifts or inheritance of relevant business property qualify for relief (subject to conditions) that reduces the taxable value of the property by 90% for the purposes of CAT.

Agricultural Relief: Gifts and inheritances of agricultural property qualify for relief (subject to conditions) that reduces the taxable value of the property by 90% for the purposes of CAT.

Favourite Nephew / Niece Relief: When certain conditions are met the nephew or niece of a disponer can be treated as the child of the disponer for the purposes of CAT Relief. What this means is that the nephew/niece is moved from the Group B to Group A Threshold. To qualify, the following conditions must be met.

  1.  Where the beneficiary is a child of a brother or sister of the disponer.
  2. Who has worked substantially on a full-time basis for a period of five years ending on the date of the benefit;
  3. In carrying on or assisting in carrying on the trade, business or profession of the disponer or in carrying on work of, or work connected with, the office or employment of the disponer; and
  4. The benefit consists of property, which was used in connection with such trade, business, profession, or employment or office of the disponer or consists of shares in a company owing such property.

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