u.s. expat tax guide – ireland
What is Capital Acquisitions Tax (CAT) in Ireland?
Capital Acquisitions Tax (CAT) in Ireland is a tax on the value of gifts and inheritances you receive. If you’re a US expat in Ireland and you acquire valuable assets, such as property, cash, or investments, CAT may apply.
What are the different types, rates, and thresholds for CAT?
CAT includes two main types: Gift Tax and Inheritance Tax. Gift Tax applies to assets you receive as gifts, while Inheritance Tax is applied to assets you inherit. The current CAT rate is 33%. The tax-free thresholds depend on your relationship with the person giving the gift or inheritance:
- Parent to Child: Up to €335,000 tax-free
- Close Relatives (siblings, nieces, nephews, grandchildren): Up to €32,500 tax-free
- Other Individuals: Up to €16,250 tax-free
It’s important to remember that these thresholds can change, so staying updated on the latest figures is essential.
How does CAT affect US citizens living in Ireland?
Unlike in the US, where the person giving the gift is taxed, in Ireland, the recipient (you) is liable for CAT if the value exceeds the tax-free threshold.
When would a US citizen in Ireland need to pay CAT?
You’ll need to pay CAT if the total value of gifts or inheritances you receive surpasses the tax-free thresholds.
This rule applies even if the assets are outside Ireland, as long as the giver is an Irish resident. For example, if you inherit property in Ireland from an Irish resident, you may owe CAT on the value of that property.
How do you declare and pay CAT in Ireland?
- Determine the Value: Calculate the total value of the gifts or inheritance you’ve received.
- Check the Threshold: See if the total exceeds the relevant tax-free threshold for your relationship with the giver.
- Complete Form IT38: This form is used to report and pay CAT and is available on the Revenue website.
- Submit the Form: You can file the form online through Revenue’s Online Service (ROS) or by mailing it.
- Pay the Tax: You can pay the tax online via ROS or through other payment methods like bank transfer or credit card.
Are there ways to reduce CAT liability legally?
Yes, there are legal methods to reduce your CAT liability:
- Annual Exemption: You can receive up to €3,000 tax-free from any individual each year, which doesn’t count toward your CAT threshold.
- Dwelling House Exemption: Under certain conditions, you might not have to pay CAT on a house you inherit.
- Agricultural and Business Relief: These reliefs can reduce the taxable value of agricultural or business property.
- Pensions and Spousal Transfers: Pensions and assets transferred between spouses or civil partners are typically exempt from CAT, which can lower your overall liability.
