Section 73: Cut Ireland’s Capital Acquisitions Tax on Lifetime Gifts

Succession planning gives families the power to transfer wealth efficiently. Yet, many people overlook one of Ireland’s best tax-saving tools: the Section 73 policy. When you structure this policy correctly, you can significantly lower the Capital Acquisitions Tax (CAT) on lifetime gifts and help your family keep more of their assets.

What Is a Section 73 Policy?

A Section 73 policy is a life assurance savings plan that helps you save for CAT on lifetime gifts. These gifts might include property, cash, shares, or other assets. Section 73 of the Capital Acquisitions Tax Consolidation Act 2003 introduced this relief. The disponer (person making the gift) can save for the tax bill without triggering extra CAT.

If you use the policy proceeds to pay the tax from the gift, Revenue does not treat this as another taxable gift. This rule helps you protect more of your family’s wealth.

How Does It Work?

For a policy to qualify for Section 73 relief, several key conditions must be met:

• The policy must be established specifically under Section 73 of the Capital Acquisitions Tax Consolidation Act 2003, with the explicit intent of covering tax liabilities.
• Premium payments must be made by the disponer, not by the beneficiaries.
• A minimum of eight years of regular premium payments is required.
• The policy should be held in one person’s name, but it may also be jointly owned by married couples or civil partners.
• Funds from the policy must be used to pay gift tax on a gift made within one year of receiving the policy proceeds.
• If the policyholder dies before completing the required eight-year term or before the gift tax is paid, the proceeds will be included in their estate.
• Any surplus after settling the gift tax remains the property of the plan owner.
• If regular premium payments stop, even after the eight-year minimum, they cannot be resumed.
• Premiums cannot be increased or decreased by more than 50% within any continuous eight-year period.

A Practical Example

Suppose you want to gift your daughter a property worth €750,000. The current Group A threshold is €400,000. So, the taxable amount is €350,000. At 33 percent, the CAT due is €115,500.

If you save about €1,050 per month for eight years in a Section 73 plan (assuming 5.5 percent annual growth), your fund could grow to about €126,262. This amount includes €25,462 from investment growth. After you pay Exit Tax of 41 percent on the growth, you would have about €115,823 left to pay the CAT bill.

You can cover the entire tax bill with the policy. Your daughter does not need to sell assets or use her own money. Most importantly, paying the CAT from Section 73 proceeds does not count as another gift, so her tax bill does not go up.

If you give her the €115,500 directly to cover her tax, Revenue would treat it as a taxable gift. That could add over €38,000 to her tax liability.

Why Is It Valuable?

1. Tax Efficiency – Section 73 proceeds do not face extra CAT when used correctly. This approach makes it a highly efficient way to pay tax on gifts.

2. Protects Family Wealth – The policy covers the tax bill in full. Beneficiaries do not need to reduce the value of their gift or look for additional cash.

3. Supports Better Planning – You decide when to fund and structure the plan. You can also include it in your wider estate strategy.

4. Works Alongside Other Reliefs – Section 73 policies work well with Section 72 policies. Section 72 covers inheritance tax on death, while Section 73 covers lifetime gifting.

When Should You Consider It?

A Section 73 policy can help if:

• You plan to gift substantial assets during your lifetime.
• You worry that your beneficiaries may struggle to pay the resulting CAT.
• You want to reduce the overall tax burden on your estate.
• You wish to preserve the value of high‑value or illiquid assets.

Final Thoughts

Section 73 policies offer an elegant and tax‑efficient way to fund CAT on lifetime gifts, helping families transfer wealth with clarity and control. As with all tax‑related planning, correct implementation is essential to ensure the policy qualifies for relief. If you are considering significant gifts in the coming years, now is an ideal time to explore whether a Section 73 policy fits your long‑term plans.

To explore how these strategies could work for your family, book a confidential consultation with Chartered Capital.

The content of this article is for information purposes only and does not constitute a personal recommendation. You should always speak to a financial adviser that is regulated by the Central Bank of Ireland when considering financial advice. Any recommendation made will be based on a full suitability assessment that will include a comprehensive review of your circumstances, needs and objectives. Past Performance Is Not A Guide To Future Returns.