The world as we know it is changing. As wealth generation is becoming increasingly more sophisticated and globalised, there has been an increased focus on tax transparency both at domestic government level and on a supranational institutional level, from the OECD to G8 and G20.

Whilst the trust continues to serve as a flexible device for the structuring of wealth for sophisticated international families, perhaps the more important considerations now are the jurisdiction in which those trusts should be tax resident and the proper law to govern such trusts.

This note highlights Ireland as a viable alternative for such trusts. In summary, the advantages of Ireland include:

  1. A deep rooted tradition of trusts;
  2.  A sophisticated professional environment with a developed market outlook;
  3.  An “onshore environment” which avoids blacklisting by the local laws of many jurisdictions, in particular Latin American countries;
  4. Long established “onshore taxing principles”.

The Tradition of Trusts

Ireland is a constitutional democracy with a common law jurisdiction. Trust law in Ireland originated from and developed following the principles of English law.

On statutory terms, the principal legislation is the Trustee Act of 1893. This continues to be the substantive statutory form of Irish trust law and broadly places Irish law on the same terms as English trust law, prior to the enactment of the English Trustee Act 1925. The Land and Conveyancing Law Reform Act 2009 also introduced a regime to allow for the variation of trusts in prescribed circumstances and also abolished the perpetuity period for trusts.

Following a number of reports by the Law Reform Commission, the present programme for government includes the introduction of a new trust bill to “reform and consolidate the general law relating to trustees so as to deal better with and protect trust assets”. The heads of the proposed bill are however yet to be agreed. The limits on statutory authority should, however, not be seen as a disadvantage as its practical impact is reduced by effective drafting of the trust deed. With appropriate drafting, we believe that Irish trust law is a suitable proper law for settlements to hold assets on behalf of sophisticated international families.

Irish trust law recognises bare trusts, discretionary trusts and interest in possession trusts. The key advantages provided by trusts established outside of Ireland, apply equally to Irish proper law trusts and include succession planning and also to provide for wider estate planning for the preservation of wealth and to preserve the continuity of the ownership of particular assets, such as a business or property within a family over the long term.

A Developed Market Outlook

Ireland and its advisors are already accustomed to dealing with complex international issues. One third of the world’s investment funds are domiciled in Ireland and one-half of the world’s commercial aircraft leasing special purpose vehicles are domiciled in Ireland. This brings with it a developed intellectual capital infrastructure, with highly qualified legal, tax and accountancy professionals.

Quite apart from the requirement for a well-organised trust law model and a developed market outlook in terms of professional expertise, sophisticated families should ensure that the structures through which they hold wealth do not create unnecessary and cumbersome tax consequences. The “blacklisting” of many traditional offshore jurisdictions enhances the Irish proposition.


When the OECD published its report in 2000 identifying which jurisdictions it considered to be tax havens, they did so according to criteria of low tax rates and a lack of transparency. Since then, a number of jurisdictions initially considered “out of favour”, addressed those OECD concerns by signing a requisite number of tax information exchange agreements.

The introduction of Foreign Account Tax Compliance Act (“FATCA”) by the US has prompted the signing by multiple jurisdictions of Intergovernmental Agreements (“IGAs”) with the US so as to facilitate financial institutions and investment advisors in their jurisdictions to meet compliance obligations under FATCA who would otherwise have a direct reporting requirement to the IRS. Notably, the G20 recently reported that the FATCA model should be adopted by all of its members as a means to ensure the exchange of information and minimise tax evasion.

Quite apart from the intense activity at a supranational level, very often it is the domestic legislation of certain jurisdictions which has caused a significant problem for those engaging in wealth planning structuring through some of the traditional offshore centres. Indeed, for some time, many Latin American families have been looking to restructure their affairs, to move away from some of the traditional offshore financial centres, on account of the fact that the domestic laws of those jurisdictions operate a black list of foreign countries. The effect of their blacklists include punitive withholding tax implications on payments to structures in traditional offshore financial centre jurisdictions.

Taxation of Irish Trusts

Bearing the above commentary in mind, ironically, the presence of a taxing regime may be an attractive consideration for family offices considering a suitable structure to locate trusts holding the wealth of high net worth families. There are three principal taxes which may affect the Irish Trust on an ongoing basis – Income Tax, Capital Gains Tax (“CGT”) and Capital Acquisitions Tax (“CAT”).

Unlike the position as applies in other jurisdictions, there is no separate tax regime for non-resident / foreign trusts. Instead, Irish tax law for trusts operate on long established statutory and case law principles.

Income Tax

For income tax purposes, it is the residence of the trustees of the trust which determines a liability to Irish income tax. Any trustee who receives income is chargeable to income tax on that income at the standard rate (20% at present) only. Even if the trustee is a corporate trustee, the income accruing to the corporation in that capacity is still subject to income tax at the standard rate, rather than to corporation tax.

It may however, be possible to overcome this Irish trustee charge to income tax, by mandating the income of an Irish resident trust to non-resident and non-ordinarily resident beneficiaries as that income arises.

Alternatively, with suitable structuring, include the interposing of a corporate in receipt of loan funding, it may be possible to overcome this income tax charge.


Unlike the position with the income tax code, there are specific provisions dealing with the taxation of a trust for CGT purposes.

For Irish CGT purposes, where the settlor and the beneficiaries are non-resident, not ordinarily resident and not domiciled in the State, there should be no Irish CGT issues for such settlors and beneficiaries, in relation to foreign assets and non-specified Irish assets. Specified Irish assets include land and buildings in the State and shares that derive their value from such assets.

Our tax code provides that the trustees of settlement shall for the purposes of CGT be treated as being a single and continuing body of persons, which as a general rule is treated as being resident and ordinarily resident in Ireland unless:

  1. The general administration of the trust is administered outside of Ireland; and
  2. The trustees or the majority of them are not resident or ordinarily resident in Ireland.

It is also possible for an Irish resident professional trustee to be treated by statute as non-resident where a settlor is non-domiciled, non-resident and non-ordinarily resident. In such a case the trustee should only be subject to Irish CGT on gains arising from disposals of specified Irish assets.


CAT is a beneficiary based charge to tax on gifts and inheritances currently charged at the rate of 33%.

An individual who takes a gift or an inheritance on or after 1 December 1991, is within the charge to Irish CAT if either the disponer or the beneficiary is resident or ordinarily resident in Ireland at the date of the gift or inheritance, or the assets are subject to the gift or inheritance are Irish situate assets.

Based on the above, provided the following conditions are satisfied;

  1. the settlor of the trust is not resident and not ordinarily resident in Ireland at the date of the establishment of the trust and at the date of any appointment from the trust;
  2. the beneficiaries are not Irish resident and not resident or ordinarily resident in Ireland at the date of any benefit received; and
  3. the assets in the trust are not Irish situate assets;

then the trust or any appointment out of the trust should not be subject to CAT.


An Irish proper law trust provides a viable solution as a wealth structuring vehicle for international families. The limits on statutory authority do make the quality of the drafting of settlements significantly more important. However, the fact that many of the principles in English trust law are considered to be persuasive in this jurisdiction with such cases being regularly cited, should provide significant comfort to the advisors of families looking to alternative jurisdictions.

In addition, provided a settlor is non-domiciled and non-resident and the beneficiaries are non- domiciled and non-resident with no Irish assets in the structure, the only significant tax issue to be managed is the income tax position of the trustees. In some respects, particularly to overcome the concerns of certain domestic jurisdictions which operates their own black list (based on a tax free status of certain jurisdictions) the existence of a flat income tax charge may in fact be welcomed. Alternatively, the mandating of such income to a non-resident beneficiary should address the concern.