New changes to Capital Acquisitions Tax on loans between close relatives

As of January 1, 2024, significant changes have been introduced to the reporting requirements for Capital Acquisitions Tax (CAT) on loans between close relatives. These changes aim to enhance transparency in financial transactions and could impact many families. As always, we aim to ensure you are kept up to date, so here’s what you need to know.

Specified Loans:

The new rules apply to “specified loans” where the amount exceeds €335,000 and remains outstanding for at least one day within a calendar year.

Definition of a Specified Loan:

A specified loan is defined as any loan:

  • Made directly or indirectly between close relatives, which can include transactions through companies owned by these relatives.
  • With interest either not paid or paid below the market rate.
  • Where interest payments are delayed beyond six months after the year’s end.

Close Relatives:

For these rules, close relatives encompass parents, grandparents, siblings, aunts, uncles, and their civil partners.

Reporting Requirements:

If a loan meets the criteria of a specified loan, the recipient must file a CAT IT38 return by October 31st of the following year. It is essential to include lender information, outstanding balance and any additional information required by Revenue.

Things to Consider:

Something we always recommend is early action and organisation, it is essential to review any existing loan arrangements with close relatives to determine if they fall under the new reporting requirements. When planning new loan arrangements, understanding these new obligations is crucial to avoid potential compliance issues.

Here at EcovisDCA, we are committed to helping you navigate these and all other changes effectively. We are happy to assist you in ensuring you and your clients remain compliant and informed about their financial responsibilities under the new CAT reporting rules.