Gifts or inheritances fall under Capital Acquisitions Tax (CAT) and where a person receives one of these, then tax is applicable. However, there are tax-free thresholds or allowances which can reduce the amount of tax to be paid.
The rate applicable to CAT in Ireland currently is 33%.
The tax-free thresholds depend on the relationship the person in receipt of the gift or inheritance had with the deceased person e.g. father/son, uncle/ nephew etc.
Children of the deceased can receive up to €335,000 before any CAT tax becomes payable. The threshold is much reduced for other relatives such as parents, siblings, nephews, and nieces as well as grandchildren. The CAT threshold here is only €32,500. Outside
of these two groups, the threshold rate is €16,250.
A point to note is that the thresholds apply over a lifetime and any gifts / inheritances you have acquired over your lifetime are aggregated for tax purposes and, if you exceed your allowance, are assessed to CAT.
A gift can be made during the lifetime of the person giving the gift, so it is of utmost importance that legal advice is taken to ensure compliance with the law and that no more tax is paid than is required. An annual gift of € 3000 to a child is tax free for example.
Careful tax planning, where a person pays less tax is not a crime, it is being prudent and within the law.
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