I propose to take Questions Nos. 521, 522 and 523 together.
Broadly speaking, a gift or inheritance is chargeable to Capital Acquisitions Tax (CAT) in Ireland where:
• the disponer was resident or ordinarily resident in the State at the date of the disposition,
• the beneficiary was resident or ordinarily resident in the State at the date of the gift or inheritance, or
• the property was situated in the State at the date of the gift or inheritance.
CAT is payable by the beneficiary at the rate of 33%, to the extent that its taxable value, when aggregated with previous gifts or inheritances taken since 5 December 1991 from within the same Group, exceeds the applicable Group threshold. There are currently three Group thresholds:
• the Group A threshold (currently €400,000) applies, inter alia, where the beneficiary is a child (including certain foster children) of the disponer;
• the Group B threshold (currently €40,000) applies where the beneficiary is a brother, sister, nephew, niece or lineal ancestor or lineal descendant of the disponer;
• the Group C threshold (currently €20,000) applies in all other cases.
Where property located outside Ireland is gifted or bequeathed by an Irish resident disponer, or to an Irish resident beneficiary, relief from double taxation may be available in Ireland. Such relief may apply by way of credit under section 107 of the Capital Acquisitions Tax Consolidation Act (CATCA) 2003, or pursuant to a double taxation agreement. Ireland currently has two double taxation agreements in place in relation to CAT:
• Convention between Ireland and the United States of America with respect to taxes on estates of deceased persons (section 10 of Finance Act 1950) which covers inheritance tax only;
• Convention between Ireland and the United Kingdom with respect to taxes on estates of deceased persons, inheritances and gifts (S.I. No 279 of 1978 and section 66 Capital Acquisitions Tax Act 1976) which covers both gift and inheritance tax.
Ireland’s tax treaty network is under continuous review and updates are prioritised in line with the Tax Treaty Policy Statement. It is policy to treat plans or negotiations for tax treaties as confidential until they are signed. This respects the confidential nature of the negotiation process.
Where there is no applicable tax treaty in force, relief from double taxation may be available under section 107 CATCA 2003. This is generally referred to as unilateral relief and provides that a credit for “foreign tax” may be taken against the Irish CAT liability arising in respect of the same property. Foreign tax is defined as tax of a character similar to estate duty, gift tax or inheritance tax chargeable under the laws of any territory outside Ireland.
The effect of the relief therefore is to reduce the amount of CAT that is payable on a gift or inheritance by the amount of foreign tax that was paid in respect of the same assets. In circumstances where the amount of foreign tax paid either equals or exceeds the amount of CAT that is payable, then this would result in no CAT being payable on the gift or inheritance in Ireland.
Where the gift or inheritance contains both Irish and foreign property the credit for foreign tax applies against the tax referrable to the foreign property only, i.e. the Irish tax has to be apportioned between the Irish and foreign property and credit is only available for the foreign tax against the Irish tax on the foreign property.
The Deputy has referenced an Irish-resident disponer leaving assets to a beneficiary resident in another member state. In the absence of full facts, it is not possible to be definitive as to the particular tax treatment that will apply however, in principle, unilateral relief under section 107 may be available where both Irish CAT and a comparable foreign tax arise in respect of a gift or inheritance.
While the Deputy references “structural limits” to the unilateral relief provisions which result in unrelieved double taxation, no specific examples or details of these limits have been set out. Accordingly, it is difficult to comment on this point however, in general, the unilateral relief provisions are widely available and any restrictions therein are necessary safeguards to ensure that double “non-taxation” is avoided and any credit is available only in relation to the property that was actually doubly taxed.
