Would foreign citizens pay inheritance tax on Irish property?

Every week, Mansion Global poses a tax question to real estate tax lawyers. Here is this week’s question.

Q. My four siblings and I inherited a house in Dublin. My brother, who lived there, died last year and the house has now been sold. Three of us are US citizens. Will we have to pay Irish inheritance tax on the amount each receives from the sale in addition to the €32,500 (US$38,628) allowed tax-free?

A. Yes. Since the house is in Ireland, the country’s inheritance tax laws still apply, said John Gill, private client partner at law firm Matheson in Dublin.

Provided that the beneficiaries have not previously received benefits from the estate, each is entitled to €32,500 excluding tax.

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“As soon as the amount of the inheritance of the deceased brother exceeds the sum of €32,500, the tax is due at the rate of 33%”, explained Mr Gill.

Each of the beneficiaries is entitled to €32,500 tax-free, and the 33% is paid only on the amount that exceeds this total.

However, if one of the beneficiaries has already received a gift from the deceased brother, this will affect the amount of tax he pays now.

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For example, if one of the siblings received land worth €10,000 a few years ago, that amount would be subtracted from the total threshold. This means that he will have to pay tax on the amount of his share of the sale of the house above €22,500.

But if this donation was made before December 5, 1991, it would not affect the threshold.

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