NEW TAX REPORTING FOR FAMILY LOANS

13 March 2024

As of 1 January 2024, significant tax reporting changes have been introduced for loans from close relatives.

The changes introduce a mandatory ‘Capital Acquisitions Tax’ reporting requirement that applies to new and existing ‘specified loans’ from close relatives.

A ‘specified loan’ is any loan, advance or form or credit that is:

received by the recipient from a close relative;
received by the recipient from a company in which the beneficial owner is a close relative;
made by a close relative to a company beneficially owned by the recipient;
made between two companies where the recipient is the beneficial owner of the borrowing company, and the beneficial owner of the lending company is a close relative.

A ‘close relative’ is considered to be any of the following:

a parent;
the civil partner of a parent;
a lineal ancestor, such as grandparents or great-grandparents;
a lineal descendant, such as children or grandchildren;
a brother or sister;
a brother or sister of a parent;
a brother or sister of the civil partner of a parent.

Who needs to file a Capital Acquisitions Tax (CAT) return?

The recipient will be required to file a CAT return where they have received a specified loan from a close relative where:

they are deemed to have taken an annual gift of the specified loan. A ‘gift’ refers to the use and enjoyment of property they are not beneficially entitled to, without providing any consideration for the right of use and enjoyment of that property;
no interest was paid on the loan within six months of the end of the year in which the gift arises; and
the combined outstanding balance of all specified loans exceeds €335,000 at any time in the relevant year.

It is important to note that there is no designated minimum amount of interest required to be paid. Nevertheless, the interest must actually be paid, not merely accrued. Furthermore, for the loan to remain non-reportable, the interest must be paid in each applicable period rather than on a one-off basis.

How we can help

We can advise you and your family on CAT filing requirements and obligations, as well as advising on structuring transactions exposed to CAT, Capital Gains Tax, transfer of assets and detailed estate planning.

Contact Us