Ireland is located on the northwest coast of Europe. It is approximately 60 miles from the mainland of the UK, and while an island, is very much part of the European Union. Ireland consists of two separate legal jurisdictions – the Republic of Ireland and Northern Ireland.

Ireland is located on the northwest coast of Europe. It is approximately 60 miles from the mainland of the UK, and while 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.

Northern Ireland is part of the United Kingdom and is subject to direct rule from the UK Parliament in Westminster. The Republic, on the other hand, is self-governing through a Parliament based in Dublin.

Some statutes from as early as 1634 are still recognised as being in effect, and other statutes from the late 13th century are technically still on the statute books. Between the Act of Union in 1801 and the 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 the 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). The currency in Northern Ireland is the British pound (GBP).

Legal System
i. Introduction
Both Irish legal systems bear many similarities to 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 throughout the entire island, the Irish language (Gaelic) is the official first national language in the Republic. It is taught in all schools there, and all official documents are published bilingually in Gaelic and in English.

However, 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.

ii. Republic of Ireland
The law of the Republic of Ireland is comprised of 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. Any statute enacted by the Irish Parliament (the Oireachtas) must not be repugnant to any term in the Constitution in order to be valid. In addition to statutes, the Oireachtas issues supplementary legislation through statutory instruments. These tend to be 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.

iii. Northern Ireland
The law of Northern Ireland is similar in many respects to that of England and Wales, but not identical. In particular, land law differs considerably as the reforms brought about in England and Wales by the Law of Property Act 1925 were not mirrored in Northern Ireland. In many cases, the law in Northern Ireland has followed the England and Wales legislation after an interval of a year or so. In the past, the Assembly of Northern Ireland has passed its legislation. Discussions are currently ongoing with a view to resuming sittings of this Assembly. Northern Ireland also has a separate court system with ultimate right of appeal to the House of Lords in London.
The taxation of the United Kingdom of England, Scotland, Wales and Northern Ireland is the same, and will be discussed in the UK summary of this Yearbook.

iv. EU
In 1973, both the Republic of Ireland and Northern Ireland became part of the then European Economic Community. Since then, both parts of Ireland’s legislative, political and social structures of both the Republic of Ireland and Northern Ireland 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.

Trust Creation and Administration
i. Republic of Ireland
The Trustee Act 1893 is still the most relevant legislation applying to trusts with minor amendments in the Trustee Act 1931 and the Trustee (Authorised Investments) Act 1958. However, other acts contain amendments and specific enactments that affect both the creation and administration of trusts. These include the Statute of Frauds 1695, the Settled Land Acts 1882-1890 and, importantly, the Succession Act 1965.

ii. Northern Ireland
An act of the Northern Ireland Assembly entitled the Trustee Act (Northern Ireland) 2001 is the most recent legislation. The Settled Land Acts 1882-1890 still have relevance, as do various other acts including the Trustee Act (Northern Ireland) 1958.

Property, Estate and Probate
i. Republic of Ireland
The most relevant acts are the Conveyancing Acts, the Family Home Protection Act 1976, various Housing Acts, the Land Act 1965, the Landlord and Tenant Acts, Registration of Title Act and the Registration of Deeds and Title Act and the Succession Act 1965.

ii. Northern Ireland
The principal legislation is contained in the Trustee Acts 1958, 2001, the Administration of Estates Act (Northern Ireland)

Trusts
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.

Most Frequently Used Trusts
Trusts are commonly used for many reasons including wealth protection, protection of the assets of a trust against greedy or importunate 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 have 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.

Governing Law
The Hague Convention on the Law Applicable to Trusts and on their Recognition, 1 July 1985 does not yet apply to the Republic of Ireland, but it does apply to Northern Ireland.

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. However, where land is involved it must be evidenced in writing. In many cases, where a trust is being created, only a nominal amount of cash will be initially settled, 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. Others are more open ended. Non-charitable trusts must comply with the rule against perpetuities, which effectively limits trusts to the perpetuity period, which in the Republic of Ireland, is the period of a life or lives in being, plus 21 years. The Perpetuities Act (Northern Ireland) 1966 allows for the creation of a fixed 80-year period in relation to Northern Ireland trusts.

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 infrequently found in trust instruments today. If the role of protector is used, it will certainly 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
In the Republic of Ireland 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.

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. In Northern Ireland, trustees may advertise for potential beneficiaries and then distribute to known beneficiaries. In the Republic of Ireland, no similar enabling provision exists except as regards claimants under a deceased’s estate.

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. In the Republic of Ireland there is no power to increase the number of trustees, unlike the position in Northern Ireland.

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
1) Republic of Ireland
The law in the Republic of Ireland makes provision for trusts to be varied but 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.

2) Northern Ireland
The Trustee Act (Northern Ireland) 1958 permits the court to vary trusts.

Confidentiality and Disclosure
Trustees may have individual reporting and disclosure requirements, particularly to the Revenue Commissioners (Republic of Ireland) or HM Revenue & Customs (Northern Ireland). In many cases, tax liability is the responsibility of the individual beneficiary who receives funds, but in most cases, trustees will have a secondary liability. This liability extends not just to reporting by delivering returns, but also to ensuring that tax is paid. In most cases, a trustee will ensure that only a partial payment is made to a beneficiary until such time as clearance is received from the Revenue in relation to any outstanding taxes.

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

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

Northern Ireland succession law is governed by the Administration of Estates Act (Northern Ireland) 1955.

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, a testator refers to either male or female.
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.

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:
• be in writing
• be 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 unless the will was made in contemplation of that marriage. A divorce 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.

Dependants’ Relief
i. Legal right of surviving spouse in the Republic of Ireland
A surviving spouse is entitled to a share in the estate of a deceased testate spouse. 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 marriage. A child is also deemed to include an adopted child. ‘Spouse’ refers to a person who is validly married to the testator at the date of the death of the testator. Spouses may renounce their legal right after marriage. A legal right has priority over devises, bequests and shares on intestacy. Spouses must select between taking a legal right share and taking a right under the will and on a partial intestacy.

ii. Rights of children in the Republic of Ireland
A child does not have a fixed right to any share of the estate of the testate deceased. However, 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.

iii Dependants’ relief in Northern Ireland
In Northern Ireland, no spouse or child has an absolute entitlement to a share of an estate, but if anyone satisfies the definition of ‘claimant’ in the Inheritance (Provision for Family and Dependants) (Northern Ireland) Order 1979, this individual may be able to claim all or part of the estate. In Northern Ireland, the term ‘spouse’ now includes civil partners, following enactment of the Civil Partnership Act 2004, which relates to same-sex couples.

Intestacy Rules
i. Republic of Ireland
In the Republic of Ireland 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 and no issue, the spouse receives the entire estate. Where there is a spouse and issue, the spouse 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.

ii. Northern Ireland
Succession to real and personal property of an intestate is governed by the Administration of Estates Act (Northern Ireland) 1955 (‘1955 Act’), which provides for members of an intestate’s family in such a way as the intestate might have done had a will been made. The estate of an intestate is distributed according to the surviving beneficiaries. ‘Personal chattels’ are defined in the 1955 Act and include, among others, vehicles, household articles and jewellery.

Although the advice of a qualified practitioner should be sought with respect to specific details, generally the distribution scheme is as follows:

• Where spouse and one child survive: spouse receives personal chattels and net value of the remaining estate up to GBP125,000 (or the first GBP125,000 and one-half of the excess), and the child receives the other half of the excess.
• Where spouse and children survive: spouse receives personal chattels and net value of the remaining estate up to GBP125,000 (or the first GBP125,000 and one-third of the excess) and the children divide the remaining two-thirds excess between them.
• Where spouse survives but none of deceased’s issue survive and parents of the deceased or their issue survive: spouse receives personal chattels and the net value of the remaining estate up to GBP200,000 (or the first GBP200,000 of the net value of the remaining estate together with one half of the excess), and the surviving parents or their surviving issue take the remaining excess.
• Where spouse survives but no issue and no parents or their issue survive: spouse takes the whole estate.
• Where issue survive but no spouse survives: issue take the whole estate per stirpes.
• Where no issue, spouse, parents or their issue survive: next of kin according to rank take the estate.
• Where there are no surviving next of kin, the Crown takes the whole estate.

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 Irish courts may make provision for a former spouse out of the estate of a deceased former spouse who has not remarried.

The amount cannot exceed the share, which the former spouse would have been entitled to under the provisions of the Republic of Ireland Succession Act 1965 if the marriage had not been dissolved.

Powers of Attorney
The two most common forms are the common power of attorney and the enduring power of attorney. Both automatically 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.

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 the Revenue Commissioners.

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.
• Letters of Administration Intestate, where the deceased died intestate.
Revenue Commissioners do not charge any fee for processing an Inland Revenue Affidavit. 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.

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 handed over.

Where the deceased before death 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 – Republic of Ireland
The taxes, which are most relevant to trusts and estates in Ireland, are income tax, capital gains tax (CGT), and capital acquisitions tax (CAT) and stamp duties. Taxation in Ireland is subject to regular amendments, usually found in a Finance Act. The Revenue Commissioners 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.

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 primarily liable for CAT. A secondary liability applies to the executors/administrators of an estate and to trustees. 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 20 per cent of the gain. Indexation relief applies for assets purchased before 31 December 2002.
Income tax is chargeable at 20 per cent on the first EUR29,200 and 42 per cent thereafter. A single person’s exemption from tax is EUR1,580. Trustees are subject to income tax at standard rate.
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 20 per cent. A person is exempt from tax on spousal transfers. Other exemptions are:
• child/foster child/minor child of a deceased child: EUR478,155
• lineal ancestor/lineal descendant/brother/sister/ child of brother/sister: EUR47,815, and
• others: EUR23,908.

iii. Tax evasion and avoidance
Tax evasion is a criminal offence in Ireland. Tax avoidance is permitted, provided it is not an artificial scheme.
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.

iv. Taxable periods and filing requirements
The tax year is now aligned with the calendar year from 1 January to 31 December. Individuals must file a return of income for each year not later than 31 October. For the year 2003 onwards, 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 tax payable for that tax year or 100 per cent of the final 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 20 per cent of the gain. For disposals after 1 January 2003, and before 30 September in any year, tax is payable by 31 October in that tax year. For disposals from 1 October and on or before 31 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.

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.
A person is ordinarily resident in the state if resident for three 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 employment income, income remitted to Ireland, and capital gains to the extent remitted. A person resident, or ordinarily resident, but not domiciled, is deemed to remit gains for CGT purposes.

ii. Expatriates
An individual resident in the State is taxed in respect of foreign source income on the remittance basis (when received) into the State. The remittance basis of taxing foreign income may be claimed for a tax year if the individual can prove:
• the individual was not domiciled in Ireland, or
• while resident as an Irish citizen, the individual was not ordinarily resident in the State for that year.
An individual continues to be ordinarily resident for three years after leaving the State.
If there is a double taxation agreement, a credit for tax paid in another country is normally available to a person who is resident or ordinarily resident in the State.

iii. 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 but non-resident is liable to income tax on investment income from foreign sources in excess of EUR3,810, and on all Irish source income and capital gains.

iv. Tax treaties
Ireland has two double taxation agreements for CAT purposes. These are with the UK and with 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.

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, 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 six per cent is chargeable. Also there is an annual levy of one per cent on the value of the assets in the discretionary trust. The one 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
The period of a trust in Irish law is that of a period of a life or lives-in-being plus 21 years. On the termination of a trust, all 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 sold subsequently 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 one per cent. Stamp duty is chargeable at various rates depending on the type of 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 of capital 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 Irish 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 or both of 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, benefit 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.

Since 1974, anti-avoidance provisions have been 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. Legislation to counteract tax avoidance by Irish residents who invest in offshore funds may also apply. A person ordinarily resident in Ireland, who is entitled to an income from an offshore fund, will be taxed as the gain arises.

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 tax or annual property taxes in Ireland.
Value added tax (VAT) is charged in Ireland. VAT on professional fees in Ireland is charged at 21 per cent. There is no sales tax in Ireland. Capital taxes in Ireland 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. There is a secondary liability for the person making the gift and on the executors/trustees paying assets to a beneficiary.

Estate Planning Issues
Inter vivos transfers of real property are subject to stamp duty. Transfers on death of real property are subject to nominal stamp duty only. There is no stamp duty on transferring liquid assets to a beneficiary. Beneficiaries must aggregate all previous gifts or inheritances taken from the same disponer. However, for gifts and inheritances received after 5 December 2001, 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 who subsequently receives a gift or inheritance of that property, the subsequent gift or inheritance is exempt from CAT if the beneficiary on the date of the gift or inheritance did not own another property.

There are anti-avoidance provisions in place to avoid income splitting.
Charitable donations are exempt from tax.

Anti-Money Laundering Rules
On 15 September 2003, new anti-money laundering regulations came into force. The regulations place obligations on solicitors, tax advisers, bankers, and effectively on all members of STEP, to establish the identity of their clients, maintain records of transactions, introduce staff training, introduce internal reporting and other procedures, and report suspicious transactions to the Garda Siochana (Irish Police) and the Irish Revenue.

The anti-money laundering regime applicable in Ireland is similar to regimes now applying in many other countries throughout the EU. The new regulations implement Directive 2001/97/EEC. Those covered by the regulations are legally required to report suspicions to the authorities.

The Irish Government is in the process of transposing the Third EU Money Laundering Directive (Directive 2005/60/EC) into national legislation.

The same rules apply throughout the UK. Please refer to the UK summary in this publication for further details.

Acknowledgement: Edmund Fry, William Fry Solicitors, Dublin, and Jeremy Hinds, Stewarts Solicitors, Comber, County Down, contributed to this summary. STEP is grateful for their contribution.