Seán Canney
Question:334. Deputy Seán Canney asked the Minister for Finance if he intends to amend the tax treatment of interest-free loans from parents to their children; and if he will make a statement on the matter. [48624/23]
View answerTuesday, 7 November 2023
Questions (334)
Written answers
Capital Acquisitions Tax (CAT) is the tax that applies to gifts and inheritances.
In the case of an interest-free loan, the person who receives the loan is deemed to take a gift for CAT purposes in each year they have the benefit of the loan. The gift is the interest-free element of the loan rather than the loan itself. The person will self-assess the value of this gift in determining whether or not any liability to CAT arises.
For example, in the case of a two-year loan in the amount of €335,000 from parent to child, the best deposit interest rate available in respect of this amount in the Irish market is currently around 3%. Based on this notional deposit interest rate of 3%, the value of the interest-free element of the loan is €10,050 for one year. When the small gift exemption of €3,000 is deducted from this amount, CAT will be due on the balance of €7,050 at the rate of 33% to the extent that this amount, when aggregated with the value of any prior gift or inheritance received by the beneficiary since 5 December 1991 from within the Group A threshold, exceeds €335,000 (the Group A threshold).
Finance Bill 2023 does not propose to make any changes to the CAT treatment of interest-free loans and I currently have no plans to amend the tax treatment of interest-free loans from parents to their children
However, the Bill proposes to introduce a mandatory reporting requirement in relation to certain interest free loans between close family members. It will apply where the interest-free loan was received from a close relative, either directly or indirectly, and the amount outstanding on all such loans during the reporting period was at least €335,000.
The introduction of this reporting requirement is intended to assist Revenue in determining whether the tax benefit of interest free loans is being self-assessed correctly.
The inclusion of the de minimis threshold of €335,000 will ensure that the additional reporting is targeted only at high-value loans, where there is a greater likelihood of a tax liability arising.
Question No. 335 answered with Question No. 326.
Question No. 336 answered with Question No. 326.
Question No. 337 answered with Question No. 326.