Valuation date and the value of benefits
Annuities and other periodic payments
Annuities or periodic payments are payments given to a person at fixed intervals for a fixed period, or for life. If you receive annuities or periodic payments as a gift or inheritance, you may have to pay tax on them.
How do you calculate taxable value?
You can calculate the market value of the annuity:
- Divide the annuity by stock return.
- Multiply this value by price per stock unit.
To calculate the value of an annuity match the amount of Government stock required to give you annual earnings of equal value. The Government stock that applies can be found at National Treasury Management Agency (NTMA).
To calculate the taxable value of the annuity, you select the stock that was last to issue on the benefit date. The price of that stock on the Irish Stock Exchange at valuation date is the taxable value.
Government stock must be redeemable not less than ten years after the date it issued.
- Example
David provided for a payment of €3,600 per year to his sister Aileen, for seven years.
Values
| Annual annuity value |
€3,600 |
| Return on relevant Government Stock |
14.5% |
| Price per unit of stock on valuation date |
€0.84 |
As Aileen will receive this benefit for just seven years, she must multiply the value by the relevant factor.
Calculate taxable value of Aileen's annuity
| Annuity divided by stock return |
3,600/(14.5 x 100) |
€24,828 |
| Multiplied by price per stock unit |
€24,828 x €0.84 |
€20,856 |
| Multiplied by the relevant factor |
€20,856 x 0.3770 |
€7,863 |
If you receive a benefit of an annuity because another person's right to it has ended, you calculate the taxable value as above. You select the latest issue of Government Stock, and use the date the other person's right ended to find the price of the stock.
If a trustee determines the amount of the annuity paid yearly, you can only determine the taxable amount for each year. In this case each payment is treated as a separate benefit received on the date the annuity is paid each year.
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