Can gift to son while based in Hong Kong affect tax in Ireland?
Q&A: Dominic Coyle
What applies in one jurisdiction can be very different than the rules in another. Photograph: iStock
I live in Hong Kong and I will be returning to Ireland in the next few years. I am an Irish citizen but currently tax resident in Hong Kong.
My son is also an Irish citizen but has never been to Ireland and was born in Hong Kong. I am wondering if there is any benefit in gifting him assets before we return as there is no gift tax here – ie will this gift impact the CAT tax free threshold when we eventually return?
Mr M.M., Hong Kong
More and more families are having to consider the implications of several different tax regimes as they and their families move countries for work or other reasons. What applies in one jurisdiction can be very different than the rules in another.
In your case, Hong Kong has no tax on any gift you may give your son; in Ireland, the situation is very different. Here, any gift in a single tax year that is above a €3,000 threshold falls under the scope of capital acquisitions tax (CAT) – otherwise known as gift or inheritance tax.
That doesn’t mean the gift will be liable to tax. It depends on what your son has already received from you or his mother. In Ireland, a parent can gift or bequeath up to €310,000 to a child before any tax is liable. Those “small” gifts of up to €3,000 are exempt and are not taken into consideration in any tot.
The threshold can, and does, move up and down depending on the economic and political circumstances of the time. In recent times, it has been as high as €542,000 in early 2009 and as low as €225,00 between late 2012 and late 2015.
At present, the pressure is on to increase the threshold, if anything.
But, clearly, the Irish thresholds cannot impact someone who is neither tax resident, or ordinarily resident here, regardless of whether they are Irish citizens. It only becomes an issue when you return home.
So, you can give your son what you like now, while you are in Hong Kong and it will never be liable for tax even when you (and he) return home.
But once you are back based in Ireland, that sum will be taken into account when assessing his tax liability for any future gifts and inheritances.
So, for example, let’s say for argument’s sake that you gift your son €400,000 while in Hong Kong. If you were in Ireland at the time, it would be liable for CAT but not in Hong Kong. When you return home, that money is still unaffected and untaxed.
However, as it is above the current €310,000 threshold, anything further he receives – beyond the annual €3,000 small gift exemption – would automatically be subject to tax at 33 per cent.