Gift below 400k threshold tax implications

[AMiraM]

Hi,

My mum has gone into a nursing home and has sold her property. She wants to distribute the sale money between her 2 children. Both parts will be below the 400k threshold.

My question is if there would be any tax implications. As I understand there is none as it is below the threshold, but I always thought, probably incorrectly, that the threshold was only for inheritance and this only happens after the person is decesead?

I guess my confusion comes from the 3000 a year gift tax free. Why would there be such a provision if my parents can give me any gift below 400k tax free at any stage before death? Unless, of course, those 3000 a year do not count for the total 400k threshold.

Could someone clarify this in simple terms for me?

Many thanks
A.

 

[ClubMan]

My question is if there would be any tax implications.

Not if this gift combined with any previous CAT group A gifts/inheritances doesn't exceed 80% of the group A exemption threshold - i.e. 80% of €400K = €320K. If it does then a CAT return must be filed.

Capital Acquisitions Tax

Capital Acquisitions Tax (CAT) is a tax on gifts and inheritances. You can get a certain amount of gifts and inheritances without paying CAT, depending on your relationship to the person you get them from..

www.citizensinformation.ie

If you get a gift or inheritance, then you are responsible for paying any Capital Acquisitions Tax that is due.

You must make a tax return if the total value of gifts and inheritances you get in one of the groups (A, B or C) since 5 December 1991 is more than 80% of the tax-free threshold for that group.

 

[AMiraM]

Thank you so much for your reply. It will be below 80% so I guess that although there is no tax I would need to declare it to Revenue somehow?

Also, my mother lives in Spain, and that is where the property was. But as I live in Ireland am I assuming correctly any gifts/inheritance would need to be declared in Ireland only? Or should I be subject to any gift/inheritance tax in Spain as well?

Many thanks
Ana

 

[ClubMan]

so I guess that although there is no tax I would need to declare it to Revenue somehow?

Didn't you read my reply and the link that I posted? You only need to file a return if the total of all group A gifts/inheritances that you have received to date exceed €320K.

Also, my mother lives in Spain

You should have mentioned that originally. There may or may not be Spanish tax implications arising from such a gift. You should search Askaboutmoney for existing threads on this and maybe also get independent professional cross jurisdictional tax advice.

 

[AMiraM]

I did read it. Sorry if I offended you. Only need to do a tax return if over 80%. I wasnt's sure tax return and declaring were the same things. As in, I have to tell them that I got it even if there is not tax to be paid (tax return). Sorry, it was a missunderstanding. I am spanish (like my mum) and not very familiar with the financial jargon.

Sorry, I wanted to reply earlier but as a new user I had to wait 1 hr for antispam purposes.

 

[AAAContributor]

My question is if there would be any tax implications. As I understand there is none as it is below the threshold, but I always thought, probably incorrectly, that the threshold was only for inheritance

The threshold relates to what's termed 'Capital Acquisitions Tax' (CAT) which includes receipts of gifts and inheritances.

I guess my confusion comes from the 3000 a year gift tax free. Why would there be such a provision if my parents can give me any gift below 400k tax free at any stage before death? Unless, of course, those 3000 a year do not count for the total 400k threshold.

Your understanding is correct; the small gift exemption of €3,000 does not count against the CAT Group Thresholds.

It's worth considering (given the international elements to your query) if the CAT provisions for foreign domiciled individuals apply which could mean the gift is not within the charge to Irish CAT in the first place (which would mean discussions regarding group thresholds and filing thresholds are redundant).

You mention that you live in Ireland. Were you born and reared in Spain by any chance? If so, you could be tax resident in Ireland but potentially 'foreign domiciled'.

For CAT purposes, a foreign domiciled person will be deemed non-resident (and non-ordinarily resident) in Ireland unless he/she was resident for the five consecutive years of assessment preceding the date of the benefit and on that date is either resident or ordinarily resident in Ireland (per Section 6(4) CATCA). This provision may not apply in your case (i.e. if you are living in Ireland for a long time) but it is worth mentioning for completeness - for instance, if you had a Spanish tax domicile and were living here for, say, 4 years, even though you are tax resident in Ireland, you would be deemed non-resident for Irish CAT.

EDIT: Our posts crossed. I see you are Spanish.

 

[ClubMan]

You don't need to contact the Irish Revenue tax authorities about this unless your cumulative group A gifts/inheritances to date come to €320K+. I have no idea if any Spanish tax issues arise in this situation.

 

[AMiraM]

Thank you for your response.
I was born and raised in Spain, but living here for a number of years now. Over 5 and therefore resident, so the CAT exception would not apply, but I appreciate it you taking the time to answer and offer different scenarios.

 

[VInterested]

@AMiraM , I believe you will have to pay tax in Spain but it depends on how you are going to proceed.

If you get the money in a Spanish Bank as a donation, then you will have to pay tax on it. This is due to the rules from the so called "Impuesto de Sucesiones y Donaciones".
If the money is not based in Spain (which is not your case) then it is when you wont have to pay any tax on it.

I want to give you some info that you can explore and research that might help you before you do anything: in Spain you can use a different financial concept in that you get the money from your parent as a loan and not as a gift.

You will have to contact revenue and present the form S1 when the transfer is for more than 100.000 euros.

If you create a parental loan, you will need to formalise a contract and add the quantity, how you are going to repay it back and the terms. You could use a long term and a very small quantity to repay which your mother could give it back to you in cash if you see what I mean.
You can also have 0 interest and that also needs to be mentioned in the form called "modelo 600". I have friends that have used this in the past and it is really not difficult, just make sure you add all info that it is required, you can find a lot of examples in the web on this.

You can do that contract without the intervention of a notario/solicitor which is handy, it means it can be a private contract and it covers you in case that in the future there could be any questions on the money you have received from your mother.

You need to present the form within 30 days of receiving the money. Each autonomy has their own rules and I do not know the maximum you can get from a parent as "a loan" but it is worth to consider this option too.