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What are the new Capital Acquisitions Tax reporting requirements for certain interest free ‘Specified Loans’?
Interest free loans have become increasingly common in recent years whereby loans are advanced to family members to assist each other, for example in assisting in financing a child’s purchase of a home. The advancement of such loans now has a greater impact on recipients, resulting in increased Irish Capital Acquisitions Tax (‘CAT’) filing obligation regardless of whether any tax is due.
From 1 January 2024, a new mandatory tax filing obligation arises where such interest free loans (or favourable rate loans) are made to close relatives or through companies involving close relatives.
Reportable Interest Free Loans
The new filing requirement applies to loans where:
- The loan is made to close relatives or through companies involving close relatives
- The loan exceeds €335,000 in the reporting period
- No interest, or interest below market rates, has been paid on the loan during the calendar year;
- No interest is paid within a six-month timeframe
Note that the market rate of interest to be considered on the loan is, the highest rate of return that could be received from an investment of that money on deposit.
‘Close Relative’
A close relative is someone related to the beneficiary of the loan for the purposes of either the Group A or Group B thresholds, and include the following:
- a parent of the person,
- the spouse/ civil partner of a parent of the person,
- a grandparent or grandchild,
- a brother or sister of the person,
- an aunt or uncle of the person, or
- an aunt or uncle of the spouse/ civil partner of a parent of the person.
Reporting Deadlines
The new filing obligation applies to both new loans made from 1 January 2024 and existing loans. Revenue has confirmed that any existing loans in place at 31 December 2023 that are not repaid by 31 August 2024 will be reportable and due to be filed by 31 October 2025. It should be noted that this is not a once off reporting requirement. Each year that a beneficiary has a loan falling under the new reporting requirements, they must file a return to report the relevant details.
Should you have any queries in respect of the above, please contact our dedicated tax team.
