Capital Acquisitions Tax (CAT)

Capital Acquisitions Tax (CAT) - Ireland’s tax on gifts and inheritances - is one of the most significant wealth-transfer taxes you will ever encounter. With a flat rate of 33%, CAT can turn a life-changing inheritance into a major financial liability. Yet, with the right advice, planning, and relief strategies, CAT can often be minimised or even eliminated.

At Irish Tax Hub, we help families, individuals, and business owners navigate this complex area with precision. Whether you are inheriting a family home, receiving a gift from abroad, or planning your estate to reduce your children’s tax bills, our tailored expertise ensures you keep more of what matters most.

What Is Capital Acquisitions Tax (CAT)?

CAT applies when a person (the beneficiary) receives a gift or inheritance from another person (the disponer). The tax is calculated on the market value of the asset received, reduced by any reliefs and exemptions, and compared against your lifetime tax-free threshold.

If the total value of gifts/inheritances you receive from someone in the same threshold group (since 5 December 1991) exceeds your limit, you owe CAT at 33% on the excess.

👉 Think of CAT as a running total: every qualifying gift or inheritance you receive from a relative adds up over your lifetime.

CAT Thresholds in 2025

Thresholds depend on your relationship to the disponer:

• Group A (€400,000): Parent → child (includes adopted, step, certain foster children, and minor orphans).
• Group B (€40,000): Siblings, nieces, nephews, grandchildren.
• Group C (€20,000): Everyone else (e.g. friends, cousins, non-relatives).

In addition:

• Small Gift Exemption: You can receive up to €3,000 per year per donor tax-free, regardless of group.
• Spouse/Civil Partner Exemption: All transfers between spouses/civil partners are exempt.

How CAT Is Calculated

Example 1: Basic Inheritance

• House inherited: €500,000
• Group A threshold: €400,000
• Taxable amount: €100,000
• CAT at 33% = €33,000 due

Example 2: Multiple Gifts Over Time

• Gift from Mum (2010): €100,000
• Gift from Dad (2015): €50,000
• Inheritance from Dad (2024): €300,000
• Total: €450,000 → exceeds €400,000 Group A threshold by €50,000
• Tax = €16,500

Reliefs and Exemptions: Saving Thousands on CAT

CAT law includes generous but highly technical reliefs. At Irish Tax Hub, we identify every opportunity to reduce liabilities:

1. Dwelling House Exemption – Complete exemption for inheriting a home if:
2. You lived in the house for 3 years before inheritance.
3. You don’t own another property.
4. You remain in the house for 6 years after.
   ✅ Example: Jane, who cared for her father in the family home for 4 years, inherits the house tax-free.
5. Agricultural Relief – 90% reduction in value if:
6. At least 80% of assets inherited are agricultural property.
7. The beneficiary is an “active farmer” or leases the land under qualifying arrangements.
8. Business Relief – 90% reduction on business assets if:
9. Business is genuine (not mainly investment).
10. Shares are held for 2+ years before transfer.
11. Favourite Nephew/Niece Relief – Treats a qualifying niece/nephew as Group A if they worked in the family business for 5+ years.

International and Cross-Border Issues

CAT applies broadly:

• If either the disponer or beneficiary is Irish-resident or domiciled, worldwide assets are taxable.
• Non-residents inheriting Irish property may also face CAT.
• Double Tax Agreements (DTAs) may provide relief if inheritance tax is also payable abroad.

👉 Example: Sean inherits a London property while living in Dublin. He faces UK inheritance tax AND Irish CAT. Irish Tax Hub helps claim foreign tax credits to avoid double taxation.

Common Pitfalls

• Forgetting prior gifts: Revenue aggregates all benefits since 1991.
• Missing deadlines: CAT returns (Form IT38) must be filed by 31 October of the following year.
• Overlooking reliefs: Dwelling house or agricultural relief often go unclaimed due to lack of documentation.
• Incorrect valuations: Revenue may dispute lowball property valuations.
• Cross-border ignorance: Non-residents often miss Irish CAT exposure.

Case Studies

Case Study 1: Family Home Transfer

Michael inherits his mother’s €600,000 home. He had lived there with her for 3 years and owned no other property. He qualifies for the Dwelling House Exemption → Zero CAT liability.

Case Study 2: Farm Inheritance

Aoife inherits €1.5m of farmland. With Agricultural Relief, taxable value is just €150,000. At 33%, her liability is €49,500 instead of €495,000.

Case Study 3: Overseas Inheritance

Raj, resident in Ireland, inherits €200,000 from an uncle in India. Despite the uncle living abroad, Raj owes CAT in Ireland under Group C (€20,000 threshold). His taxable amount = €180,000 → CAT = €59,400.

Use our CAT calculator to estimate your tax liability or check out our other tools here.

Filing CAT: Deadlines and Compliance

• File Form IT38 if your benefits exceed 80% of your threshold.
• Valuation date determines deadline.
• Payment and filing deadline: 31 October in the year after valuation date.
• Revenue audits CAT returns aggressively, particularly with property valuations.

👉 Irish Tax Hub ensures timely, accurate filings with defensible valuations to withstand Revenue scrutiny.

FAQs

Do children always pay CAT?
No. They have a €400,000 lifetime threshold, and reliefs like the dwelling house exemption can eliminate CAT.

Can I plan to avoid CAT?
Yes. Gifting assets gradually using the €3,000 small gift exemption and transferring businesses/farms strategically can reduce liabilities.

Are foreign inheritances taxed?
Yes—if you are resident/domiciled in Ireland. Relief may apply through DTAs.

Can life insurance cover CAT?
Yes. Section 72 policies are specifically designed to pay CAT liabilities.

Why Choose Irish Tax Hub?

Unlike general guides, we:

• Calculate precise CAT exposure based on lifetime benefits.
• Identify all reliefs/exemptions to minimise tax.
• Handle international inheritances and treaty claims.
• Provide robust property/business valuations.
• File CAT returns on time, with no mistakes.

Our clients often save tens or hundreds of thousands of euro by structuring inheritances correctly.

Final Thoughts

CAT is not just a tax - it’s a wealth transfer challenge that affects nearly every Irish family at some point. With the right planning, many liabilities can be reduced or avoided.

At Irish Tax Hub, we specialise in making sure your inheritance is preserved, your compliance seamless, and your tax liability minimised.

👉 Contact Irish Tax Hub today for a personalised CAT consultation. Don’t let 33% of your legacy go to Revenue - let us protect what’s rightfully yours.