Ireland

*Updated March 2020*

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• Legal System
• Inheritance and succession
• Estate planning
• Taxation
• Residence and domicile
• Other relevant information

Legal system

The legal system consists of constitutional law, statutory law and common law. 

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Inheritance and succession

Succession

Succession law is governed by the Succession Act 1965, which applies to all deaths after 1 January 1967. The general rule is that a testator may leave their property to whomever they wish, but this is subject to some significant limitations including the following:

• A surviving spouse is entitled to a ‘legal right share’. The legislation provides that if the testator leaves a spouse and no children, the spouse has a right to one-half of the estate and if there are children, the spouse has a right to one-third of the estate. This legal right share may be renounced in an ante-nuptial or post-marriage contract. Similar provisions apply to civil partners.
• Children of the testator may apply to the court for a share or an increased share of the deceased’s estate. The court will consider whether the testator has failed in his moral duty to make proper provision for the child in accordance with his means. The application is considered from the point of view of a prudent and just parent, taking into account the position of each of the children of the testator and any other circumstances which the court may consider of assistance.
• Cohabitants are also conferred rights of redress on death under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010; however, not to the same extent as spouses or civil partners.

Family law and defined inheritance rules

Yes. The Children and Family Relationships Act 2015 introduced changes to guardianship, custody and access. The Act also introduced a legislative framework to govern donor-assisted reproduction and parentage in such cases. There are no defined inheritance rules.

Probate process

If the deceased has a will, having appointed an executor, application for a grant of probate may be made. If the deceased has not appointed an executor willing or able to act or has died intestate, application for letters of administration may be made. An Inland Revenue affidavit setting out the assets of the estate must be completed. Executors and administrators must undertake to collect all the assets of the estate and to distribute those assets in accordance with law.

The Probate Office charges a fee for all grants of representation. The fee depends upon the value of the estate. Details can be found at http://courts.ie.

Mental capacity

In Ireland, the jurisdiction in relation to decisions for adults who lack capacity and minors in certain circumstances currently lies with the High Court, with cases being dealt with by the President of the High Court, the judge responsible for wardship matters, together with the Office of Wards of Court.

An enduring power of attorney (EPA) may be executed allowing an attorney to deal with property and make personal care decisions during any subsequent incapacity of the donor. The EPA must be registered at that stage to be operative. The area of capacity is currently undergoing dramatic change with the enactment of the Assisted Decision Making (Capacity) Act 2015, some of which was commenced in late 2016. Additional sections are expected to be commenced in late 2018.

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Estate planning

Use of trusts in estate planning

Trusts are commonly used in succession planning for reasons such as wealth protection, management of assets for minors or persons who are mentally incapable, pension funding, and tax planning. Trusts are created either by will or during a person’s life, generally by deed.

Use of foundations in estate planning

Foundations are not commonly used as they are not recognised under Irish law and there is a lack of clarity on tax treatment.

Types of entities

Bare trusts are used to gift assets to minor children. Advantages may rest in the asset vesting at an early stage for tax purposes, in particular where asset values may rise. However, a child may gain control of the asset at 18 years of age. As a result significant gifts to minors may also be given through other structures, such as partnerships.

Partnership structures are used as vehicles by families to hold and control assets. Advantages may lie in the structure being transparent for tax purposes but enabling a level of control to be centralised in a managing partner. Limited partnerships are used by families, although given the strict statutory requirements they are best suited to significant assets with liability issues.

Interest in possession trusts give an interest in the income of an asset for a fixed period or for life. These are often used for complex family arrangements. For example, a testator who has been married a second time might leave a life interest to his or her spouse with the remainder to children. The spouse would continue to live in the family home for life and be entitled to income with the remainder interests being preserved for the next generation. Although a life interest trust will not satisfy the legal right share it can suit parties in some circumstances. Interest in possession trusts are also increasingly used to deal with family members with creditor issues or where there is imminent risk of bankruptcy.

Discretionary trusts are commonly used under wills where minor children may inherit. The trust property is held by trustees to apply income or capital or both for the benefit of members of a class of beneficiaries. The income or capital may be applied by the trustees in their absolute discretion. It is usual for a letter of wishes to be written providing trustees with guidance.

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Taxation

Income tax system

An individual who is resident or ordinarily resident in Ireland is liable to income tax on their worldwide income. Special rules apply to individuals who are resident or ordinarily resident in Ireland but not domiciled in Ireland – these individuals are only liable to income tax on foreign income if it is remitted to Ireland.

In relation to trusts, if the trustees are resident or ordinarily resident in Ireland then they are liable to income tax on the worldwide income of the trust. A trust is generally regarded as resident in Ireland for income tax purposes if all the trustees are resident in Ireland for tax purposes.

Personal income tax rates

Income tax

Universal Social Charge (USC):

Individuals aged over 70 or individuals in possession of a full medical card pay USC at a maximum 3 per cent rate on income above EUR12,012, provided their aggregate income for the year is EUR60,000 or less. Aggregate income does not include payments from the Department of Social Protection. A ‘GP only’ card is not considered to be a full medical card for USC purposes

Pay-Related Social Insurance (PRSI):

Capital gains tax

Individuals who are resident or ordinarily resident in Ireland, but not domiciled, are only liable to CGT on foreign gains to the extent that the gains are remitted to Ireland.

A trust will be regarded as being resident in Ireland for CGT purposes where the majority of the trustees are resident in Ireland and the general administration of the trust is carried on in Ireland. The standard rate of CGT on disposals since 6 December 2012 is 33 per cent.

Non-residents taxable on

Individuals/trusts neither resident nor ordinarily resident in Ireland are liable to income tax on Irish-source income only (for example rental income etc). Individuals/trusts neither resident nor ordinarily resident in Ireland are liable to CGT on gains arising on the disposal of ‘specified assets’ (for example (1) Irish land and buildings, (2) assets of a business carried on in Ireland, (3) minerals in Ireland, (4) exploration rights in the Continental Shelf or (5) shares deriving their value from (1), (3) and (4)).

Withholding tax rate 

Where dividend withholding tax applies, the rate of withholding tax is 25 per cent with effect from 1 January 2020. 

Taxation at death

CGT: death is generally not an occasion when disposal occurs for CGT purposes. A person becoming entitled to an asset by reason of death is treated for CGT purposes as having acquired the asset on the date of death and at its market value on that date.

Capital acquisitions tax (CAT): CAT comprises gift tax and inheritance tax. CAT applies where a person becomes beneficially entitled to property, either by way of a gift or inheritance, for less than full consideration. A charge to CAT generally arises where (1) the donor is resident or ordinarily resident in Ireland or (2) the beneficiary is resident or ordinarily resident in Ireland or (3) the subject matter of the gift or inheritance is situated in Ireland. Special rules apply to non-domiciled donors and beneficiaries.

Gifts or inheritances between spouses or civil partners are exempt from CAT.

Gifts or inheritances taken on or after 5 December 1991 from donors within the same group threshold (see below) must be taken into account when calculating CAT. These benefits serve to reduce, or cancel out, the amount of the tax-free threshold available. Amounts in excess of the threshold are taxed at 33 per cent (applicable from 6 December 2012).

Other taxes

*This applies to inheritance taken by a parent from a deceased child, subject to certain exceptions

Rates of inheritance tax

Other taxes

Gift tax: see commentary above relating to CAT.

Wealth tax: in Ireland wealth tax comes in the form of a local property tax (LPT), which applies to residential properties and is levied at 0.18 per cent for properties up to a market value of EUR1 million and 0.25 per cent on the portion of value above EUR1 million. The amount payable will depend on the market value of the residential property on a particular date.

For 2020, certain local authorities have increased their LPT rate, resulting in different LPT rates. The increases range from 2.5-15 per cent. Revenue will make the changes automatically.

Tax treaties

Link to revenue website detailing Irish tax treaties: www.revenue.ie/en/practitioner/law/tax-treaties.html

Tax information exchange agreements

See: www.revenue.ie/en/business/tax-information-exchange-agreements.html

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Residence and domicile

Special rules on becoming resident

A person is resident for Irish tax purposes if they spend:

• 183 days in Ireland during a tax year (calendar year); or
• 280 days in aggregate in Ireland over the course of the tax year and the preceding year and provided they spend more than 30 days in Ireland in each year, they will be regarded as resident for the second year.

A day for residence purposes is a day where one is in Ireland at any time during the day. A person will be regarded as ordinarily resident in Ireland for a tax year if he/she has been resident in Ireland for the previous three tax years.

Special rules on ceasing residence

A person will continue to be regarded as ordinarily resident in Ireland until he/she is not resident for three continuous tax years.

Domicile concept for gifts and inheritance

Domicile can be very important for gift and inheritance purposes.

A non-domiciled individual will only be resident and ordinarily resident for CAT purposes if they have been resident in Ireland for five consecutive years immediately preceding the year the gift or inheritance falls and are resident or ordinarily resident in the year in which they take the gift or inheritance.

A benefit taken from a discretionary trust established before 1 December 1999 can be within the charge to CAT if the settlor of the trust has an Irish domicile.

Anti-avoidance provisions can apply to individuals who hold Irish property through a foreign incorporated company. These rules primarily apply to Ireland-domiciled individuals, but can apply to non-Ireland-domiciled individuals in certain circumstances with effect from 1 January 2016.

Taxation of holdings by non-residents on death and of gifts

A gift or inheritance of Irish property will be liable to CAT, regardless of the residence status of the beneficiary or donor.

Reporting/auditing requirements

There are a number of reporting and auditing requirements in Ireland:

• All income and capital gains must be returned to revenue in an annual tax return.
• Beneficiaries are required to file a CAT return in respect of taxable gifts and taxable inheritances received where 80 per cent of the appropriate threshold has been exceeded. The tax year for CAT returns runs from the 1 September until the 31 August. Anything liable for tax during this period must be returned to Revenue by 31 October.
• A person who is resident or ordinarily resident in Ireland, who settles property on a discretionary trust, must make a return to revenue within four months of the settlement.
• A person who is resident or ordinarily resident in Ireland and domiciled, who settles assets on an offshore trust, must also make a return to revenue within three months.

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Other relevant information

Asset protection laws

The principal legislative provisions in relation to asset protection are:

• Bankruptcy Act 1988. If a person is adjudicated bankrupt within two years of the date of a gift or settlement, the gift or settlement is automatically void. If a person is adjudicated bankrupt within five years of the date of the gift or settlement the transfer is presumed void unless it can be demonstrated that the person was solvent at the time of the transaction.
• National Asset Management Agency (NAMA) Act 2009. The NAMA was established in December 2009 as one of a number of initiatives taken by the Irish government to address the serious problems caused by the Irish financial crisis. This is a legislative provision empowering NAMA to petition the court to set aside certain transactions where the court is satisfied that an asset was disposed of and the effect of the disposition was to defeat, delay or hinder the acquisition by NAMA or a NAMA group entity of an eligible bank asset or impair the value of an eligible bank asset. There is no requirement to prove intention of fraud in order to have a transfer declared void under it. There are also no time restrictions on the transfer.
• Land and Conveyancing Law Reform Act 2009. There is a general provision under the Land and Conveyancing Act 2009, which provides that any conveyance of property made with the intention of defrauding a creditor or other person is voidable.

Foreign currency restrictions

No.

Foreign ownership restrictions

No. In Irish law there are no explicitly stated restrictions on foreign ownership of Irish companies and assets.

AML/due diligence and other requirements and regulatory procedures for advisors

Ireland has transposed the EU Money Laundering Directive into law in the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 and 2013. The 2010 Act increased the obligations on a wide range of designated persons, but also introduced a risk-based approach to customer due diligence and a necessity for designated persons to understand structures such as trusts, partnerships and foundations. It is now necessary for trust and company service providers to obtain authorisation to carry on business in Ireland through the Anti-Money Laundering Compliance Unit. Amendments were introduced by the 2013 Act to ensure a closer alignment of Irish law with international standards set by the Financial Action Task Force.

The following legislation has been enacted to give effect to 4AMLD:

• European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 (SI 560 of 2016);
• The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2018;
• European Union (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2019; and
• European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 (SI 110 of 2019).

Further legislation to implement the EU Fifth Anti-Money Laundering Directive is expected to be published and enacted in 2020.

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STEP branches in Ireland

There is one STEP branch in Ireland.

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