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Jurisdictional Reports

*Updated March 2014* Ireland is located off the north-west coast of Europe. It is approximately 60 miles from the mainland of the UK and, although an island, is very much part of the European Union (EU).

Introduction

Editorial Board

Nora Lillis TEP
William Fry, Dublin, Republic of Ireland

Beryl Power TEP
PricewaterhouseCoopers, Dublin, Ireland

New developments

The Assisted Decision Making (Capacity) Bill 2013 proposes the repeal of the Marriage and Lunatics Act 1811 and Lunacy Regulation (Ireland) Act 1871. The legislation, once enacted, will introduce a more modern and functional approach in assisting those lacking mental capacity in legal decisions.

A. History and background

Ireland is located off the north-west coast of Europe. It is approximately 60 miles from the mainland of the UK and, although an island, is very much part of the European Union (EU). Ireland consists of two separate legal jurisdictions – the Republic of Ireland and Northern Ireland. The Republic of Ireland is entirely self-governing through a Parliament based in Dublin. Between the Act of Union in 1801 and Government of Ireland Act 1922, the entire island of Ireland was part of the United Kingdom of Great Britain and Ireland. Following the Anglo Irish Treaty of 1921 and Government of Ireland Act 1922, the island of Ireland was separated into two entities, which have since maintained their respective legal systems. These entities are the Republic of Ireland (consisting of 26 counties) and Northern Ireland (consisting of six counties).


The currency in the Republic of Ireland is the euro (EUR).

B. Legal system

The legal system bears many similarities to those of both the UK and the US. This is especially true in relation to trust and estate law.


While English is predominantly the language in use, the Irish language (Gaelic) is the official first national language in the Republic of Ireland. It is taught in all schools, and all official documents are published bilingually in Gaelic and in English. Even so, Gaelic is not commonly spoken in the cities and survives mainly in small rural communities known as the Gaeltacht, located mainly in the western portion of the country.


The law comprises the three elements of constitutional law, statutory law and common law. The Constitution of 1937 is the basic law of the State.


The Irish Parliament consists of two elected houses: the Dail and the Seanad. In order to be valid, any statute enacted by the Irish Parliament (the Oireachtas) must not be repugnant to any term in the Constitution. In addition to statutes, the Oireachtas issues supplementary legislation through statutory instruments. These tend to cover short administration matters such as commencement dates for portions of legislation or changes of monetary amounts or limits authorised in acts.


The common law of Ireland was imported from England during the 17th century when English common law replaced the Irish system of laws (the Brehon laws). There is now a considerable jurisprudence of reported decisions from the Irish courts in all aspects of economic and social life.


In 1973 the Republic of Ireland became part of the then European Economic Community. Since then its legislative, political and social structures have been increasingly influenced by law emanating from European Community institutions (such as the Commission and the Council of Ministers), leading to a high degree of uniformity with other members of the EU.


Sources of Law

A. Trust creation and administration

The Trustee Act 1893 still governs many aspects of the law of trusts, with minor amendments in the Trustee Act 1931 and the Trustee (Authorised Investments) Act 1958. The Land and Conveyancing Law Reform Act 2009 contains significant provisions in relation to trusts of land, variation of trusts and the abolition of various rules including the rule against perpetuities. In addition, other acts contain amendments and specific enactments that affect both the creation and administration of trusts. These include in particular the Succession Act 1965.

B. Property, estates and probate

The Land Law and Conveyancing Law Reform Act 2009 modernises and simplifies over 140 pre-1922 acts on land law and conveyancing law and, in particular, establishes a new statutory model of ‘trusts for land’.

C. Taxation

Numerous finance acts and other specific acts such as the Capital Acquisitions Tax Consolidation Act 2003 and the Taxes Consolidation Act 1997 apply to different taxes.


Trusts

A. Introduction

Trusts have been used in Ireland since at least 1634. There is neither one definition of what circumstances constitute a trust, nor is there any special wording. Generally, a trust is created by a formal document, but trusts may also be verbal or created by a particular set of circumstances. In essence, a trust is a binding obligation that requires persons (called ‘trustees’) to hold or manage property for the benefit of individuals called ‘beneficiaries’. These beneficiaries may be named individually or may be identified as part of a class or group of individuals – such as the children of a named person. The person creating the trust is called the ‘settlor’. It is important to note that the trust itself is not a separate legal entity. Trustees become the owners of the trust property, and beneficiaries are entitled to expect the trustees to manage the trust property for their benefit in accordance with the terms of the trust.

B. Most frequently used trusts

Trusts are commonly used for many reasons, including wealth protection, protection of the assets of a trust for beneficiaries, protection of businesses, pension funding, and legitimate tax planning. Trusts may be fixed trusts where, from the outset, the purpose is defined and the beneficiaries are known. In these trusts, beneficiaries know exactly what their respective interests are at all times, and they are entitled to enforce those interests or rights against the trustees. There are discretionary trusts where all that is certain is that the trustees have been given specific property and that they have to hold it on behalf of a class or group of beneficiaries, each of whom has no defined right to any specific share until such share has been allocated by the trustees.


Irish courts have continued to take a practical and often innovative approach to trust law to enable an aggrieved party to obtain restitution. This device may be adopted by the court in circumstances where it decides that property should be restored to its rightful owner and that the person in whose name the property stands cannot in good conscience be allowed to retain it.


Trusts are often created either in wills or by separate lifetime deeds, and frequently these trusts are set up for the protection of family wealth. Sometimes the intention is to preserve the property for future generations but, not surprisingly, trusts are often created to protect the present generation against themselves. The trust is the vehicle through which the family safeguards its ‘legacy assets’ and passes them on to future generations.


Trusts are also used to protect wealthy individual clients’ businesses. For example, many successful entrepreneurs have built up their businesses by the time they are in their mid-life. Frequently, they will not know which of their children will be the best suited to having an involvement in the business, and while this period of uncertainty exists, they will place the ownership of the shares in trust. The trustees will hold the shares in consultation with the parent and then ultimately will see to the appropriate transfer of the business to the child or children in due course. The advantage of using a trust is that, should the parent die before this transfer is put into place, the trustees can continue to hold the shares and make an appropriate determination at a later stage. Often, parents with young children will not know how they are going to develop and what life will hold in store for each of them. Such parents will quite frequently use a trust that allows for the possibility of a proper distribution of wealth and maintenance of the family business. These types of trusts are called discretionary trusts, as the trustees have the discretion to decide which of the children should benefit and to what extent and when they should benefit. In other words, the trustees may decide to distribute the property under their care in unequal amounts and at different times among the beneficiaries.


Trusts may also be used to protect the child, rather than the asset. These include trusts established by parents with young children or children with a physical or mental disability, or trusts to protect a child from the child’s spouse.


Trusts are not limited solely to individuals or families. They are very common in the business or commercial world as in pension arrangements, or where it is desired to make provision for a group of employees.


Trusts are used in business, not just for wealth generation or protection, but also for philanthropic uses through charitable trusts. Many individual companies will have their own separate charitable trusts set up to make charitable payments on their behalf.

C. Governing law

The Hague Convention on the Law Applicable to Trusts and on their Recognition, 1 July 1985 does not yet apply.

D. Creation of a trust

i. Valid constitution

In order for a trust to be created, the subject matter must be certain; the objects of the trust must be certain and the words used to create the trust must be used in an imperative sense to demonstrate an intention to create a trust. Most trusts are created by a formal trust deed or a written will, but trusts may also arise from a set of circumstances or by implication from activities of the parties. A trust may be created orally in some cases, but where land is involved it must be evidenced in writing and there must be a minimum of two trustees. In many cases, where a trust is being created, only a nominal amount of cash will be settled initially, with further funds or property being added at a later stage.

ii. Duration and termination

Trusts may be created for a fixed period or for a defined purpose that in turn delineates the trust period. The rule against perpetuities was abolished by the Land Law and Conveyancing Law Reform Act 2009but the rule against perpetual trusts remains so it is necessary to define the period of the trust.

iii. Beneficiaries

As mentioned above, the identity of the beneficiaries must be known or capable of being ascertained. Since 1976, it has been accepted that beneficiaries of trusts, including discretionary trusts, have a right to require trustees to provide information to them, but this right generally does not include the right to ascertain the reasons behind a decision of the trustees.

iv. Trustees

Trustees are appointed in the trust instrument. Where none are appointed or where they predecease the appointment, or refuse to act, the court may appoint trustees. Trustees continue until death or, if permitted by the deed, retirement. Retirement, if not expressly authorised in the deed, may also be accomplished with the consent of all the beneficiaries. Removal of trustees may be permitted by the provisions of the trust deed or compelled by all the beneficiaries where they are entitled together to the entire fund. The court may also intervene where it is expedient to do so. Trustees are generally not entitled to remuneration except as provided for in the trust instrument.

v. Protectors

Protectors are found in trust instruments today. If the role of protector is used, it will be in the initiating deed, and the extent of the role will also be defined. Generally, a protector is given a veto over only some of the actions of the trustees. For example, trustees may have to obtain the protector’s advance consent before appointing trustees outside Ireland or where a fundamental change is anticipated.

vi. Role of public trustee or guardians

The Office of the General Solicitor often undertakes the role of public trustee for minors and wards of court. This solicitor is employed by the state, and is often appointed by the court to act for particular individuals in wardship matters.

E. Trust administration

I. General management

Trustees are charged with managing the fund and with ensuring that it is appropriately safeguarded and invested. Most modern deeds establishing trusts contain a provision allowing trustees to delegate certain of their responsibilities to others. Unless bound by a provision of the trust deed, the trustees are not obliged to consult with beneficiaries in relation to investment decisions, but must nonetheless ensure that all investment decisions carried out are in compliance with the terms of the deed or in accordance with trust law.

ii. Distributions from trust

Distributions from the trust must be in accordance with the terms of the deed. Where the trust has come to an end, for example by the happening of a specific event, the trustees must distribute to the beneficiaries. Trustees are obligated to ascertain the identities of beneficiaries.

iii. Change of administrators

A change of trustees may take place if permitted by the trust deed. Normally, one trustee is insufficient, and generally there must be a minimum of two. There is no power to increase the number of trustees. However, in certain cases where one trustee retires one or more trustees may be appointed in the retiring trustee’s place.

iv. Passing of accounts

Depending on the terms of the trust, the trustees will have an obligation to prepare and provide information to beneficiaries. Trustees must prepare clear and accurate accounts, and must provide them to beneficiaries on request. Most trustees will prepare an account at least annually, and will require approval of the accounts by beneficiaries before making any final distribution.

v. Variation of a trust

The Land Law and Conveyancing Law Reform Act 2009 includes specific provisions in relation to the variation of trusts by the Courts and the first judicial consideration of these new provisions was seen in W v M. Otherwise the law makes provision for trusts to be varied only in four specific circumstances.


Where the rule in Saunders v Vautier applies (i.e. where all the beneficiaries are of full age and capacity and all agree to terminate the trust), the trust may be varied without the need for court approval. This rule has caused difficulties in many instances. For example, although this consent may be forthcoming from all of the beneficiaries, some of them may be under the full age of 18 years at the time. The law does not allow a parent or guardian to speak for such infants, nor does it allow the court to give its consent on behalf of such infants.


Where appropriate, courts may intervene and exercise what has been known as its ‘salvage’ jurisdiction where trust property is likely to be damaged or destroyed.


To enable payment of income to infants in limited circumstances, the court may exercise its inherent jurisdiction to vary the terms of a trust deed, but not to enable payments to incapacitated and needy adults.


As part of a compromise in a genuine dispute before the courts, a final order may be made, notwithstanding the fact that some of the beneficiaries are infants and incapable of consenting to any such settlement in the eyes of the law.

F. Confidentiality and disclosure

Trustees may have individual reporting and disclosure requirements, particularly to the Revenue Commissioners (Revenue). In many cases, tax liability is the responsibility of the individual beneficiary who receives funds, but trustees can also be exposed to liabilities.


Under money laundering regulations, there is an obligation to ascertain the identity of beneficiaries, and in circumstances where there exist suspicions about the source of funds or the purpose to which they have been applied, trustees are obliged to report their suspicions to the appropriate authority.


Property, Estates and Probate

A. Introduction

Succession law is governed by the Succession Act 1965, which applies to all deaths after 1 January 1967.


A person who wishes to dispose of assets on death achieves this by leaving one or more testamentary instruments. The original document is called a will. Subsequent additional written documents are called codicils. In this summary, the term testator refers to either a man or woman.


Where a testator does not make a will, or only disposes of part of that testator’s estate by will, then the portion undisposed of passes under the intestacy rules.

B. Wills

i. Requirements for a valid will

Statutory formalities for making a will are contained in the relevant succession acts.


For a will to be valid it must satisfy all of the following conditions:


  • it must be in writing and signed by the testator
  • the signature must be made or acknowledged in the presence of two or more witnesses present at the same time
  • the signature of the testator must be at the foot or end of the will (additions made after the original execution must comply with the formalities for the original will), and
  • the testator must be of sound mind and have the intention of making a will. The testator must be of the minimum age of 18 years. (There are exceptions where the testator is married or where the testator has power to appoint a guardian.)

ii. Forms/types of wills

A will is revocable by the testator at any time before death. Mutual wills are valid. To establish that wills operate as mutual wills, binding on a survivor, mere intention is not sufficient. There must be an actual agreement. The agreement should be recited in the wills themselves.


Testators may leave their estates to trustees of trusts created by the will.

iii. Revocation and alteration of wills

A will is revoked if a testator subsequently marries or enters into a civil partnership, unless the will was made in contemplation of that marriage or civil partnership. A divorce or ending of the civil partnership does not automatically revoke a will.


A will may be revoked by another will or codicil or by writing declaring an intention to revoke it and execute it in the manner in which a will is required to be executed, or by destruction of the will by the testator or by some person in the testator’s presence and by the testator’s direction.


Where a testator had possession of a will before death, and after death the will cannot be located, the presumption is that the will has been destroyed. A copy of a lost will can be admitted to probate if the presumption of destruction has been rebutted. A testator may execute a document in accordance with the same formalities as are required for a valid will as a republication confirming an existing will or codicil. Where a will has been revoked, it may be revived.

iv. Types of testamentary gifts, and lapse, abatement and ademption

A ‘devise’ refers to properties such as land, and a ‘legacy’ or ‘bequest’ refers to any other type of property. In the classification that follows, to avoid duplication, reference is to legacies. The exact same classification applies when dealing with devises and bequests.

1) Specific legacies

This is a gift of a particular asset owned by the testator at the date of death. A specific legacy does not abate until all other property available for general gifts has been exhausted. It is subject to ademption.

2) General legacies

This is a gift of property not specifically identified. A gift of money is known as a pecuniary legacy. The courts lean against specific legacies. A general legacy is not subject to ademption.

3) Demonstrative legacies

This is a hybrid of specific and general legacies. An example would be ‘EUR10,000 to A to be paid out of my shares in ABC Plc’.


To the extent that the fund specified is sufficient to pay the legacy in full, it is treated as a specific legacy. If the fund identified is insufficient to pay the legacy in full or has ceased to exist, it is treated as a general legacy.

4) Residuary legacies

It is usual to have a residuary clause. The residuary benefits are to be used first to pay all debts, liabilities and costs.


5) Annuities

An annuity is treated as a general legacy. An annuity charged on specific assets is a specific legacy.

6) Income and interest on legacies

For specific and residuary legacies and demonstrative legacies, the legatees are entitled to any income that arises from the date of death.


In the case of general legacies, interest is payable from the end of the executor’s year.

7) Ademption

Ademption applies to specific legacies or specific devises. If the subject matter of the gift is no longer in existence at the date of operation of the will, it is regarded as having been adeemed.

8) Conversion

In the case of expressed trusts for sale of land, equity will regard the property as constituting money from the moment the trust deed takes effect; and in the case of death, from the date of death. For an inter vivos trust deed, it is the date of its execution.


The same principle applies for contracts for the sale of land. Equity will regard the purchaser as having an interest in the real property from the date the contract is signed. If the vendor dies before completion, the sale proceeds pass to those entitled to the vendor’s personal property.

9) Abatement

Normally, debts are paid first out of the residuary estate and then out of general legacies.

C. Dependants’ relief

I. Legal right of surviving spouse or civil partner

A Surviving Spouse Or Civil Partner Is Entitled To A Share In The Estate Of A Deceased Testate Spouse Or Civil Partner. If There Are No Surviving Children, The Legal Right Is One-half Of The Estate. If There Are Children, The Legal Right Is One-third. It Is Irrelevant Whether A Child Is Or Is Not A Child Of The Relationship. A Child Is Also Deemed To Include An Adopted Child. These Rights May Be Renounced. A Legal Right Has Priority Over Devises, Bequests And Shares On Intestacy, And There Is A Right Of Election Between Taking A Legal Right Share And Taking A Right Under The Will And On A Partial Intestacy.

ii. Rights of children

A child does not have a fixed right to any share of the estate of the testate deceased. Nonetheless, a court may make an order for provision for a child after determining what proper provision is. A claim on behalf of a child must be commenced within six months of the grant.

D. Intestacy rules

The Succession Act 1965 lays down the rules for distribution of the estate of a deceased person who dies wholly or partly intestate.


Where an intestate dies with a spouse or civil partner and no issue, the spouse or civil partner receives the entire estate. Where there is a spouse or civil partner and issue, the spouse or civil partner receives two-thirds and the children one-third between them. If the deceased’s issue die, not standing in an equal degree of relationship, the distribution is per stirpes. Advancements made to a child during the lifetime of the deceased are to be taken into account. If a deceased dies without a spouse or issue, the estate is distributed between the parents of the deceased. If there is no spouse, issue or parents surviving, the estate is to be distributed equally between brothers and sisters. If an intestate dies leaving no spouse, issue, parents, siblings or their children, the estate is distributed between next of kin. In relation to civil partner’s rights on intestacy only, a court may, on application, make orders in favour of children affecting the civil partner’s rights.

E. Rights of former spouses on death

If a valid divorce decree is granted, the result is that the marriage is dissolved and the parties cease to be husband and wife. The courts may make provision for a former spouse out of the estate of a deceased former spouse who has not remarried. Similar issues apply to civil partners.


The amount cannot exceed the share that the former spouse or civil partner would have been entitled to under if the marriage had not been dissolved.

F. Powers of attorney

The two most common forms are the common power of attorney and the enduring power of attorney. Both generally cease on death. A common or ordinary power of attorney applies only while the creator remains of sound mind. An enduring power of attorney takes effect only when the grantor is incapable of managing that grantor’s own affairs. An enduring power of attorney can be created to deal with both assets and personal care provisions. The creation of an enduring power is subject to strict requirements, including the need to have the power explained by a solicitor and to have the grantor’s competence certified by a medical practitioner.

G. Probate matters

If a deceased dies with a will, having appointed an executor, application for a grant of probate may be made. If the deceased has not appointed an executor or has died intestate, application for letters of administration may be made.


In all cases, an Inland Revenue affidavit setting out the assets of the estate must be furnished to Revenue, although this is managed through the Probate Office.


Executors and administrators must undertake to collect all the assets of the estate and to distribute those assets in accordance with law.


The most common forms of grant, known as grants of representation, are:


  • grant of probate issued to executors of a will
  • letters of administration with will annexed, issued to an administrator appointed by the courts, where no executor is willing or able to act or where no executor was appointed by the will, and
  • letters of administration intestate, where the deceased died intestate.

The Probate Office charges a fee for all grants of representation. The fee depends upon the value of the estate.


An executor or administrator is not entitled to charge fees for extracting a grant of representation or for administering the estate. A fee may be charged by an executor/administrator where a charging clause allowing the executor/administrator to charge such fees is included in the will.

H. Assets not requiring probate

In principle, no assets may be dealt with without a grant of representation. In practice, financial institutions may agree to hand over monies without a formal grant of representation, subject to receiving clearance from the Revenue that no tax is payable and an appropriate indemnity from the person to whom the assets are passed.


Where before death the deceased nominated a beneficiary to obtain an asset, the asset may be passed in those circumstances. This normally applies in the case of a joint deposit account or insurance products. An individual may make a gift of assets to a beneficiary in contemplation of death. This is known as a donatio mortis causa. It applies where the deceased physically hands an asset to a beneficiary.


Taxation

A. Introduction

The taxes that are most relevant to trusts and estates are income tax, capital gains tax (CGT), capital acquisitions tax (CAT) and stamp duties. Taxation in Ireland is subject to regular amendments, usually found in a Finance Act. The Revenue are empowered to make regulations with respect to a particular matter contained in legislation. Case law provides for the interpretation of legislation. Double taxation treaties have the force of law in Ireland.

B. Tax system

i. General concepts of tax liability

Generally, trustees are assessable for the payment of income arising to a trust, except where beneficiaries are assessed directly. Beneficiaries of an estate who receive assets from a trust are liable for CAT. CGT is payable by executors/administrators and/or trustees on disposals from trusts.


In most cases, the total of trustees’ income earned in the trust from all sources is taxable. Trustees are not entitled to any personal allowances against this amount. A beneficiary who receives income accounts for tax on a grossed-up basis, and is allowed a deduction for tax paid by trustees.

ii. Rates and tax incentives

CGT is charged at 30 per cent of the gain. Indexation relief applies for assets purchased before 31 December 2002.


Income tax is chargeable on individuals at the standard tax rate (currently 20 per cent) on the first EUR32,800 and the higher tax rate (currently 41 per cent) thereafter. A single person’s exemption from tax is EUR1,650. Trustees are subject to income tax at the standard rate only. The higher rate is not applicable. A USC charge is imposed from 1 January 2011 on an individual’s gross income. The following are the current rates and bands:


  • income less than EUR10,036 pa exempt
  • 2 per cent on the first EUR10,036
  • 4 per cent on the next EUR5,980
  • 7 per cent on the balance
  • a surcharge of 3 per cent applies to individuals aged under 70 who have income from self-employment that exceeds EUR100,000 in a year.

Special rates and bands apply to those aged over 70 and to those who hold a full medical card.


Where income is accumulated and not distributed within 18 months of the end of the year, a surcharge of 20 per cent is charged.


CAT is chargeable at 30 per cent. A person is exempt from tax on spousal transfers. CAT thresholds for 2012 are:


  • child (including the child of a civil partner/step child/foster child/minor child of a deceased child: EUR250,000
  • lineal ancestor/lineal descendant/brother/sister/child of brother/sister: EUR33,500, and
  • others: EUR16,750.

iii. Tax evasion and avoidance

Tax evasion is a criminal offence. Tax avoidance is permitted, provided it is not an artificial scheme. Under the Mandatory Disclosure Regime, the promoters (and in some cases the users) of certain tax planning schemes must provide details of the schemes to the Revenue. This is intended as a warning mechanism for the Revenue in respect of what they believe to be aggressive tax planning. The legislation is supplemented by the Revenue guidance, which provides further detail as to the types of transactions that the Revenue expect to be reported.


In the case of all taxes, there are provisions to prevent avoidance. For example, in relation to CGT there are anti-avoidance provisions in relation to sales to connected persons, disposals in a series of transactions, dealings through non-resident trusts, and dealings through non-resident companies. There is also a general anti-avoidance provision that gives power to the Revenue to challenge transactions which give tax-payers a tax advantage. Commercial transactions and the bona fide use of a legislative tax benefit are generally excluded.

iv. Taxable periods and filing requirements

The tax year is aligned with the calendar year from 1 January to 31 December. Individuals must file a return of income and capital gains/losses for each year not later than 31 October. The due date for the payment of preliminary tax is 31 October in the year of assessment. Preliminary tax is 90 per cent of the final income tax payable for that tax year or 100 per cent of the final income tax payable for the previous year.


Trustees/executors of an estate may deduct interest paid for the purposes of any trade or profession carried on by them. Trustees are not entitled to deduct expenses of administration in calculating tax.


Capital gains tax is chargeable at 30 per cent of the gain in 2012. For disposals after 1 January, and before 30 November in any year, tax is payable on 15 December in that tax year. For disposals in the month of December in a tax year, tax is payable on 31 January in the following year. The disposal date is the date an unconditional contract is made. Interest is charged on overdue tax and a surcharge applies to overdue returns.

C. International

i. Resident with foreign investment/transactions

Individuals are deemed to be resident in the state for a year if they spend 183 days in the state, or 280 days in the state in that year and the preceding tax year. Residence rules in Ireland were amended byFinance Act (No.2) 2008 to provide that where an individual is present in Ireland at any time during a particular day, the individual will be considered resident for that day for the purposes of the residency rules. The old rules required presence in Ireland at midnight.


  • A person is ordinarily resident in the state in the fourth year if they are resident for the previous three consecutive tax years.
  • A person ordinarily resident and domiciled in Ireland is taxable on worldwide income and capital gains.
  • A person resident or ordinarily resident, but not domiciled, is taxable on Irish source income, foreign employment income to the extent that the duties are performed in the state, and other income and capital gains to the extent remitted into the state.

An individual continues to be ordinarily resident for three years after leaving the state.


The remittance basis of taxing foreign income may be claimed for a tax year if the individual can prove that s/he was not domiciled in Ireland, in that tax year. The remittance basis of taxing foreign income was until the tax year 2009 also claimable by an Irish citizen who was resident in Ireland but not ordinarily resident Ireland for that tax year, but this is no longer available for the tax year 2010 and subsequent tax years.


If there is a double taxation agreement, a credit for income tax paid in another country is normally available to a person who is resident or ordinarily resident in the state.

ii. Non-residents

A non-resident who is not an individual is liable for Irish income tax at the standard rate of tax on Irish source income. The higher rate applies to individuals only.


A non-resident trustee or executor is taxed at the standard rate.


A non-resident individual is liable to income tax on total income from Irish sources, and is taxable according to income levels. A non-resident is subject to CGT on specified gains.


A person who is ordinarily resident and domiciled but non-resident is liable to income tax on their worldwide income, with the exception of:


  • income from a trade or profession, no part of which is exercised in the state, or
  • an office or employment all the duties of which are exercised outside the state.

Such a person is liable in respect of all other income (investment income) in excess of EUR3,810, and capital gains.

iii. Tax treaties

Ireland has two double taxation agreements for CAT purposes. These are with the UK and the US. In other cases, in respect of CAT, there is unilateral relief. Ireland has a number of double taxation treaties. Most comply with the standard Organisation for Economic Co-operation and Development (OECD) Model Treaty.

D. Taxation of trusts

i. Types of trusts and tax liability

In the case of a discretionary trust, where no person is entitled to an interest in possession and there is no spouse, the child of the disponer or child of a child who predeceased the disponer under the age of 21 years, a one-time discretionary trust tax of 6 per cent is chargeable. Also, there is an annual levy of 1 per cent on the value of the assets in the discretionary trust. The 1 per cent charge applies only in any year that no person has an interest in possession capable of lasting for five years or more. A life interest is always deemed to be capable of lasting for five years or more.


Exemptions available to an individual are also available to trustees of a trust for CGT purposes, except for the annual exemption of EUR1,270.


In the case of income tax, trustees are chargeable for tax as set out above.

ii. Duration and termination

There is no perpetuity period of trusts in Ireland now but there must be a trust period. On the termination of a trust, payments out to a beneficiary are subject to income tax on any income. There is also a charge for CGT on any gain in the trust. CGT does not arise where the interest passing to a beneficiary arises on the cessation of a life interest and the beneficiary receives an absolute interest. A beneficiary receiving a benefit is deemed to receive a gift or inheritance subject to CAT. A benefit passing from a trust can be subject to both income tax and CAT. A credit is available against CAT for any CGT payable by trustees on the same event. There are claw-back consequences where the asset is subsequently sold within two years.

iii. Transfers to a trust

Transfers to a trust are subject to CGT on any capital gain arising to the settlor. The settlor is liable to the CGT charge. There are no income tax or CAT implications in transferring assets to a trust for the settlor.


Dispositions to a trust are subject to both CGT and stamp duty. Stamp duty on shares is 1 per cent. Stamp duty is chargeable at various rates depending on the type and value of the property.

iv. Distributions to beneficiaries of Income and capital interest

A beneficiary who receives income from a trust will be liable for income tax. The beneficiary will be entitled to the normal exemptions and reliefs available to an individual, and will be entitled to a credit for any tax paid by the trustees.


Distributions may be subject to CAT. Relief is available from CAT for any CGT payable by the trustees on the disposition to the beneficiary arising in respect of the same property, but this relief is subject to claw-back if the asset is sold within two years.


The trustees may mandate income to a beneficiary. The beneficiary will be assessed directly as if that beneficiary received the trust income from various sources. Where trustees receive and then distribute the income, the Revenue may assess the beneficiary directly, or may assess the trustees and the beneficiary in full. The beneficiary will be taxed on the income, net of expenses. Trustees remain taxable on income required to cover trust expenses. The practice is that net income is treated as taxed income and is brought into the beneficiary’s own income when it is actually paid to that beneficiary. Where trustees receive and accumulate the income for the benefit of the beneficiary, that income when it passes to the beneficiary may be subject both to income tax and CAT.

v. Non-resident trusts and foreign investment entities

Since the Finance Act 2002, the Revenue will tax a trust in which the settlor has an interest. Legislation applies to tax the settlor of a non-resident trust on chargeable gains in respect of disposals made on or after 7 March 2002 if the settlor is resident or ordinarily resident in Ireland, irrespective of whether the settlor is a beneficiary. This tax applies only to Irish-domiciled individuals.


A relevant beneficiary is defined as the settlor, spouse of the settlor, company controlled by either of or both the settlor and spouse of the settlor, or a company associated with a company controlled by the settlor and/or the spouse of the settlor.


A settlor has an interest in a trust if trust income or property, now or in the future, benefits the settlor.


With retrospective effect from 6 April 1999, a trust where the settlor is excluded, regardless of domicile, residence status, or ordinary residence status of the settlor, will be liable to CGT where the beneficiary is domiciled resident or ordinarily resident. If the beneficiary is domiciled in Ireland, and either resident or ordinarily resident, then that beneficiary is potentially within the scope of the section.


Anti-avoidance provisions are also in place to deal with the transfer by Irish residents of cash or other assets to foreign tax havens. If the transferor has power to enjoy the income from the transferred assets or receives or is entitled to receive any capital sum from such assets, the transferor is liable for income tax in Ireland in respect of the income.


The Finance (No.2) Act 2008 in Ireland introduced a reporting requirement for professional persons including non-Irish-resident professional persons, such as solicitors, accountants and financial intermediaries. The reporting requirement arises where a professional person is ‘concerned with’ the establishment of a settlement, where the settlor is Irish-resident and the trustees are non-Irish-resident.


The settlor of a discretionary trust is also obliged to inform the CAT section of Revenue on the establishment of the trust in certain circumstances.


E. Taxation of estates

i. Estate and gift taxes

There are no death duties in Ireland. The executors/administrators of an estate are subject to income tax and CGT arising during the course of the administration of the estate.


Beneficiaries will be subject to income tax only to the extent that they are entitled to income arising in the estate. Beneficiaries of an estate are also subject to CAT on amounts over the relevant threshold applicable to the individual.

ii. Taxation on death

Executors/administrators of an estate are obliged to bring the tax affairs of the deceased up to date, to pay outstanding taxes, and to file all outstanding tax returns for which the deceased was liable.

F. Other taxes

There are no wealth taxes in Ireland. Value added tax (VAT) is charged in Ireland. VAT on professional fees is charged at 23 per cent. There is no sales tax. Capital taxes are CGT on gains subject to an annual exemption of EUR1,270 and CAT. CAT is payable by the beneficiary and not by the person making the gift/bequest.


The Local Government (Household Charge) Act 2011 introduced an annual EUR100 household charge that is payable by owners of residential property. The household applies to a residential property owned by a person even if that owner is not resident in Ireland. For the purposes of the charge, a Trustee or a personal representative once a grant has issued is considered an owner of a property. In 2012 and subsequent years, the liability date is 1 January and the charge must be paid by 31 March each year. Penalties apply for late payment.


In addition to the household charge, there is an annual EUR200 charge on non-principal private residences (NPPR). The NPPR applies on the same basis as the household charge however, the liability date is 31 March and the charge must be paid by 30 June in 2012. Penalties apply for late payment.

G. Estate-planning issues

Inter vivos transfers of real property are subject to stamp duty. Transfers on death of real property are now subject to stamp duty.


When computing a CAT liability, beneficiaries must aggregate all previous gifts or inheritances taken from the same disponer (and disponers within the same class). For gifts and inheritances received after 5 December 2001, however, there is aggregation only for those gifts and inheritances received from the same disponer since 5 December 1991.


Where property is occupied by an individual for a period of three years (and that individual subsequently receives an inheritance of that property), the inheritance is exempt from CAT, subject to certain conditions, if the beneficiary on the date of the inheritance did not own another property. An exemption is also available from gift tax, but there are more onerous restrictions.


There are anti-avoidance provisions in place to avoid income splitting.


Charitable donations are exempt from tax.


Other Relevant Matters

A. Anti-money laundering rules

The Irish government has transposed the Third EU Money Laundering Directive (Directive 2005/60/EC) into national legislation.

B. Charities Act 2009

The Charities Act 2009 provides for the reform of Irish charity law. It aims to ensure greater accountability by charities, to enhance public trust and confidence and to increase transparency in the charities sector. Although the legislation was signed into law on 28 February 2009 the vast majority of its provisions have yet to be commenced. The most substantive provision that has been commenced grants power to the Courts, in the event of proceedings against a charity trustee, to grant relief to such trustee from personal liability for breach of trust, where it appears to the relevant Court that the trustee acted honestly and reasonably. It is expected that the provisions will be fully commenced in 2014.


Key features of the Charities Act 2009 include the introduction of the first statutory definition of charitable purposes in Ireland, the establishment of a new regulatory authority for charities to secure compliance by charities of their obligations and to encourage better administration of charities. It provides for the establishment of a register of charities for all charities operating in the Ireland and the introduction of annual reporting requirements, including activity reports and accounting and audit requirements for all charities.


The Revenue Commissioners will continue to determine eligibility for charitable tax status. Although the charities regulatory authority will determine whether or not an organisation is a ‘charitable organisation’, it will remain a matter for the Revenue to determine whether an organisation will be entitled to avail itself of the various tax exemptions available to charities.

Acknowledgment: Edmund Fry and Jeremy Hinds contributed to this summary. STEP is grateful for their contribution.