US Tax Planning Services Ireland

US Federal Estate Tax. Irish Capital Acquisitions Tax

Non-US individuals with assets located in the USA may be subject to US estate tax in addition to tax arising in their country of residence. Such assets include (i) U.S. Real Estate, (ii) Stocks and Shares in US corporations, (iii) Cash Deposits with US brokers, (iv) U.S. registered ETFs, (v) U.S. tangible personal property, (vi) certain business interests or debts owed by U.S. individuals, etc.  Provided the deceased person is not domiciled in the US and not a US citizen at the time of death, their estate will only be subject to Federal Estate Tax (FET) on US situs property.

U.S. Federal Estate Tax can arise on the estate of a deceased Irish tax resident person if the amount of US-situs assets, held by that person, is greater than $60,000 on their death, even if that person has never lived or worked in the United States.  As a result, receiving an inheritance from a US source can have unexpected tax implications for Irish resident beneficiaries.  It’s important to take into consideration that a spousal exemption only applies if the recipient is a US citizen.

U.S. Estate Tax rates range from 18% to 40% on US situs assets. The estate tax exemption is $60,000. Therefore, a US estate tax liability can be easily triggered for a non-resident, non-US individual.  If a US Federal Estate Tax liability arises, it is the Executor who will be primarily responsible for settling it.  Any tax due should be paid by filing form 706NA within nine months of the date of death.

Irish Capital Acquisitions Tax applies to inheritances received by Irish residents, regardless of (i) where the assets are located or (ii) the tax residence of the person providing the inheritance. As a result, if an Irish resident individual inherits U.S. situs property, Irish tax obligations could arise.

Capital Acquisitions Tax becomes payable if (i) the beneficiary is resident or ordinarily resident in Ireland at the time of receiving the inheritance and (ii) if the total value of all gifts and inheritances received from the same disponer exceeds the relevant group class thresholds.  Unlike US FET, if an Irish resident individual receives a gift or an inheritance from their spouse or civil partner, it is exempt from CAT.

Other issues to consider are (i) the timing of asset transfers and (ii) currency fluctuations.

The Ireland/US Double Taxation Agreement protects against paying Inheritance Tax, in both countries, on the same assets. The specific taxes covered by this treaty are Federal Estate Tax and Capital Acquisitions Tax.

For further information, please click the following links:

https://www.revenue.ie/en/gains-gifts-and-inheritance/credits-you-can-claim-against-cat/double-taxation-relief-usa.aspx

https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax-for-nonresidents-not-citizens-of-the-united-states

If you are an Irish resident individual with U.S. assets, it is recommended that you seek inheritance and estate planning tax advice to carefully manage U.S. FET exposure.  For further information, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.