LAWLINK: Avoiding gift tax headaches

Q: Our son has been living abroad for many years and he is in the process of looking for an apartment. We want to help him out financially to ensure that he can get a really nice place – both for living in and as an investment in the future. We are worried that this gift will cause headaches for us. Can you advise?

A: Your son should consult with a lawyer or tax advisor in the country he is living in, as well as in Ireland. Different countries have different rules as regards taxation of gifts. There are some EU-level rules, but Ireland has opted out of these.

In some countries, gift tax (what we call Capital Acquisitions Tax or CAT) applies only where the person giving the gift is resident in the country. In other counties, including Ireland, CAT should only apply where the person receiving the gift is in the relevant country. In some jurisdictions there is no such concept as a Gift Tax.

It may be possible to transfer a cash gift to your son free of any Irish CAT or of any gift tax in their current country of residence.

It is also possible that he may be charged for gift tax in his country, so perhaps it would make sense to try and have it classed as an Irish gift.

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All told, this is very much dependent on the tax laws of the country of residence as well as the nature of the gift given.

All relevant tax advice should be followed as you want to ensure that all matters are attended to properly in both Ireland and his country of residence.

You should also note that some relief on double taxation may apply if your son is charged CAT here and gift tax abroad. There are different considerations if he were to live in the UK or the USA, for example. Your tax advisor will be better able to advise.

Again, depending on the country he is living in, you may be asked to sign certain documentation regarding the gift. You should ensure that you are fully satisfied with this, particularly if the documentation is not in English.

If you are unsure, you should retain a lawyer in the country where your son is living.