lump sum: loan or gift?

[panindub]

Hi, if parents would send from abroad a lump sum as a loan to their child, which would be returned with regular monthly payment through bank over a fixed period of time, would the child have to pay tax? would it be considered as a gift anyway?
Cheers.

 

[Nige]

an interest free loan is a gift for Capital Acquisitions Tax purposes.
However, the "gift" is only the value of the interest foregone.
Every individual can get a gift of up to €3,000 for any person every year that is disregarded entirely for CAT purposes, so if the foregone interest were €6k per annum or less, this loan does not create any tax issues.

If it would be more than €6k per annum, then it will eat into the person's Tax Free Threshold. A person can get gifts/inheritances from their parents of up to €540k before they become subject to CAT (at 22%).

Obviously, if the loan were written off, the amount outstanding would become a gift.

 

[panindub]

Thanks. To make it more complicated, would it be possible to have an interest loan with parents?

 

[Domo]

It would be possible to create a loan withe interest charged, which would not be a gift, if the loan was repaid and interest paid.

The interest charged would be taxable in the hands of the person receiving the interest.

It would be best to document this loan, and record all transactions related.