Q I am 45 years old and moved to South Africa five years ago. My aunt has passed away and I have just been informed that she left her home in Co Wicklow to me in her will. She was unmarried and had no children of her own. Looking at comparable properties in the area on Daft.ie, it looks like the house could be worth €550,000. I’m incredibly grateful to my aunt for this gift, I’m a worrier by nature and I’m afraid I’ll have to pay a big tax bill on this inheritance. It keeps me awake at night. How to finance this tax bill and how to do it from abroad? Joanne, Cape Town
A Because she was your aunt, your tax exemption threshold is Group B, meaning you will pay 33% Capital Acquisitions Tax (CAT) on any inheritance over €32,500. This, combined with the property’s indicative value, means that significant CAT liability is likely to arise.
It will be important to know when the property valuation date will occur, as this will dictate when you will need to file your CAT return (IT38) and pay the CAT to the tax authorities. If the valuation date falls between January 1 and August 31, you must pay by October 31 of the same year, and if the valuation date falls between September 1 and December 31, you must pay by October 31 of the following year.
The tax authorities have the power to defer payment of tax and interest if you cannot pay it without incurring undue hardship. But because the property is not your current residence or family home, it is unlikely to fall under these provisions.
If you don’t need the property, you can dispose of it to pay taxes and withdraw the net proceeds. However, capital gains tax should be considered in this scenario.
If you do not sell the property, you will need to ensure that you comply with your current tax requirements in Ireland, including payment of local property tax. As you live in South Africa you will also need to get local councils to see if any taxes are due there and if there is relief from double taxation. Although you are the taxable person and are responsible for filing the return and paying the CAT – which you can do online – there is a provision in the CAT legislation to make the executor/administrator of the estate ( an Irish resident) your “agent”.
This person would be responsible for your tax obligations and may be required to pay the CAT if you do not pay it.
“My father excluded my brother from his will. Should I give him half of my inheritance?
Q I mourn the recent death of my father and I have been told that he left me his entire estate.
He completely excluded my older half-brother from his will. Since he and I grew up together and share the same mother – she had him before she married my father – I consider him my own brother.
My dad always treated my brother worse than me, because he wasn’t his biological son. I want to give my brother half the inheritance. What would be the tax implications of this move for both of us?
James, County Wexford
A While agreeing to divide the estate equally may seem like the fairest thing for you to do, it would significantly increase WCB’s overall liability to the estate.
You would pay CAT on your father’s inheritance, giving some of the net proceeds to your brother, and then your brother would also have to pay CAT on the amount he receives that exceeds the tax-exempt threshold.
This would mean that CAT is essentially paid twice.
It is paid the first time when you exceed your Group A CAT threshold of €335,000 and you pay a CAT of 33pc and it is paid a second time when you give a gift to your brother, who should pay 33pc at the above the threshold of €32,500 for group B. .
Let me give you an example of how this works.
If the value of the net estate you inherit is €1 million and you have your total threshold of €335,000, the total inheritance tax you will pay is €219,450 (assuming no assets does not benefit from exemptions or relief).
By transferring half of the estate, or €500,000 of assets, to your brother, he would have to pay tax of €153,285. The net effect is that you would have $165,000 left over after paying CAT and your brother would have a balance of $346,715 after paying CAT.
Therefore, I suggest you donate a lower amount to your brother to even out the net amounts you both keep after paying CAT.
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