U.S. EXPAT TAX GUIDE – IRELAND
What is Capital Acquisitions Tax (CAT) in Ireland?
Capital Acquisitions Tax (CAT) is a tax in Ireland on the value of gifts or inheritances received. For US expats, this tax applies to any valuable asset acquired, not just property or land.
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What are the types, rates, and thresholds of CAT?
CAT in Ireland includes two main types:
- Gift Tax: Applies to valuable gifts you receive, such as cash, property, or heirlooms.
- Inheritance Tax: This applies to property or money inherited, based on the market value at the time of the benefactor’s death.
The current rate of CAT is 33%. However, there are tax-free thresholds based on the relationship between the giver and the recipient:
- Parent to Child: €335,000
- Other close relatives (siblings, nieces, nephews, grandchildren): €32,500
- Others: €16,250
Note: It’s important to remember that these thresholds are subject to annual review and may change.
What are the implications of CAT for American expatriates in Ireland?
Irish tax laws require that CAT be paid on gifts or inheritances above the tax-free thresholds. US inheritance and gift tax rules differ, as the US taxes the donor, whereas Ireland taxes the beneficiary.
Is there an instance where US citizens in Ireland need to pay CAT?
Yes, you must pay CAT if you receive a gift or inheritance in Ireland exceeding the tax-free threshold. This applies even if the assets are not based in Ireland, provided the giver is an Irish resident.
For example, a gift from an Irish resident or inheritance from US citizen parents residing in Ireland may be subject to CAT.
How do I declare and pay CAT in Ireland?
To declare and pay CAT, follow these steps:
- Identify Your Assets: Determine the value of the assets you acquired.
- Assess Your Liability: Check if the assets exceed the tax-free threshold.
- Fill Out the Relevant Form: Complete Form IT38 for CAT, available on the Revenue website.
- Submit the Form: Submit it online through Revenue’s Online Service (ROS) or by post.
- Pay the Tax: Pay the CAT bill through ROS, by debit or credit card, bank transfer, or cheque.
Are there any legal methods to reduce CAT?
Yes, there are. A few may include:
- Annual Exemption: Receive up to €3,000 tax-free per year from any person, known as the ‘small gift exemption.’
- Dwelling House Exemption: Exemption for a house under certain conditions.
- Agricultural and Business Relief: Reduces the taxable value of agricultural or business property.
- Pensions: Retirement benefits and compensation payments are usually exempt from CAT.
- Spousal Transfers: Assets shared between spouses or civil partners are tax-free, helping to reduce the estate’s taxable value.
Why partner with a specialist Expat accountant?
Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. We have a dedicated team of tax accountants who work exclusively with US expats earning and investing in Germany. Partnering with a specialist expat accountant can help you navigate complex tax regulations and optimize your tax situation.
