Róisín Shortall (Dublin North West, Independent)
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208. To ask the Minister for Finance the position in relation to the tax treatment of a parent who loans €40,000 to their child for the purchase of a home and who receives the money back over time; if the loan is treated as a gift for capital acquisitions tax purposes; if repayments are counted as an income for income tax purposes or have other tax implications for the parent; and the way in which both the child and parents will be treated vis-a-vis their taxes, if the loan amount is officially gifted to the child for the purposes of satisfying the child's bank and paid back over time. [46142/14]

Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that where a parent makes a loan interest free (whether described as a gift or not) to a child on the basis that the full loan will be repaid but without interest, there are no tax implications for the parent. The child is considered to be in receipt of an annual gift from the parent throughout the term of the loan. The value to the child of this gift is an amount equivalent to the income from the investment of an amount equal to the amount of the loan. In practice, this is taken to be the amount that would be earned if the amount of the loan was invested at the best bank deposit rate obtainable in the open market on such a sum.

If this annual value of the free use of a sum of cash (in effect the interest that would have been obtained had the money been placed on deposit) is below €3,000 per annum, the gift each year is exempt from CAT under section 69 CATCA 2003-small gifts exemption- provided the donee has received no other gifts in that year from the same donor.

If the annual value of the free use of cash exceeds €3,000 per annum then only the excess each year is treated as a taxable gift. However, it is important to note that no CAT becomes payable on any such gift until the total value of all taxable gifts and inheritances taken by the child from the parent exceeds €225,000.

To take an example, if the best bank deposit rate obtainable on a sum of €40,000 was, say, 2%, the donee would be deemed to take a gift each year of €800. That deemed annual gift of €800 is below the annual small gift exemption of €3,000 and is therefore completely outside the scope of CAT, assuming the donee has taken no other gifts in that year from the same donor.

If a parent makes a gift of €40,000 to a child then €37,000, being the amount in excess of the small gift exemption, is a taxable gift. However, as already indicated no CAT becomes payable on any such gift until the total value of all taxable gifts and inheritances taken by the child from the parent exceeds €225,000.

The Deputy's reference to a sum being "officially" gifted to a child is not understood. If there is some doubt about the true nature of a transaction, the Revenue Commissioners will have regard to all the relevant facts and circumstances in deciding the correct tax treatment of the transaction.

Michael McGrath (Cork South Central, Fianna Fail)
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213. To ask the Minister for Finance the implications for Ireland of the European Court of Justice ruling in respect of the levying of air travel tax on transit and transfer passengers; if he has estimated a potential cost to the State; and if he will make a statement on the matter. [46173/14]

Michael Noonan (Limerick City, Fine Gael)
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The General Court of the EU has struck down the Commission's decision that the exemption of transfer and transit passengers from the Air Travel Tax did not constitute State aid. This judgement was made on the basis that the Commission's decision was not based on a full and formal investigation.

The Deputy is aware that Ryanair lodged a State aid complaint with the Commission against the Air Travel Tax in 2009 and that subsequently, in July 2011, the Commission found that the use of a lower rate of tax for flights within 300 km of Dublin airport seemed to constitute State Aid.  The Commission dismissed Ryanair's claim that the non-application of the Air Travel Tax to transit and transfer passengers constituted a State Aid.  

Ryanair appealed the Commission's findings, both in respect of the State Aid decision and the exemption for transit passengers, to the General Court in September 2011.  As already outlined, the General Court has now struck down the Commission's decision that the exemption of transfer and transit passengers from the Air Travel Tax did not constitute State aid.  This judgement does not come to any conclusion as to whether the exemption constituted state aid. Rather, the judgement was made on the basis that the Commission should have but did not initiate a formal investigation procedure in order to gather the necessary information and to allow all parties to present their observations in connection with that procedure.  

The Commission may now conduct a formal investigation or appeal the judgment to the Court of Justice of the European Union. The European Commission has been ordered to bear its own costs and Ryanair costs.