Revenue Note for Guidance

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Revenue Note for Guidance

Schedule 25A

Exemption from Tax in the case of gains on certain disposals of shares


This Schedule supplements section 626B and deals with the interaction between sections 626B and 626C and certain existing reliefs.


Effect of earlier no-gain/no-loss transfer

par 1 In order to determine whether the company disposing of shares has held them for the required holding period, the period of ownership of shares by a company can be extended where the shares were acquired in a transaction that is treated as giving rise to neither a gain nor a loss. This could arise where assets are transferred within a group of companies. No gain or loss is treated as arising but the new owner takes over the assets for capital gains tax purposes at their original base cost. In these circumstances, where the assets consist of shares the new owner is allowed to extend the period of ownership by the time for which the shares were held by the previous owner.

Effect of deemed disposal and reacquisition

par 2 If a company is deemed under the Capital Gains Tax Act to dispose of and immediately reacquire shares which it holds (thus crystallising a gain), the holding of the shares in the period prior to the deemed disposal is not taken into account for the purposes of the holding period requirement.

Effect of repurchase agreement

par 3 Shares transferred under a repurchase agreement are regarded as remaining with the original holder for the purposes of determining whether the shareholding requirement for the purposes of the exemption has been met. Repurchase agreements are agreements under which a company transfers shares to another company subject to an agreement that the original owner will buy them back.

Effect of stock lending arrangements

par 4 Similar rules are provided in relation to stock lending arrangements.

Effect in relation to investee company of earlier reconstruction etc

par 5 A special rule applies where in the case of a reconstruction a company which held shares in one company exchanges them for shares in a second company in circumstances that there is no charge to capital gains tax but the cost of the old shares carries through as the cost of the new shares. In these circumstances the period of ownership of the new shares can include the period of ownership of the old shares for the purposes of the holding period requirement.

Negligible value

par 6 A company may not claim relief for a loss in value of shares which have negligible value if a gain on a disposal of the shares would be exempt under the new section 626B.

Degrouping: time when deemed sale and reacquisition treated as taking place

par 7 A rule is provided for a situation where a company that is a member of a group had acquired an asset on a tax neutral basis. If that company ceases to be a member of the group there is a deemed disposal and reacquisition of the asset at the time of its acquisition from the other member of the group, thus crystallising a gain. In effect, this allows the exemption under section 626B to apply if the conditions for exemption are satisfied at the time the company ceases to be a member of the group.

Appropriations to trading stock

par 8 A rule is provided for the situation where shares are appropriated by a company as trading stock. It ensures that where the gain on the shares is exempt as a consequence of section 626B, the company is treated as acquiring the shares at market value for the purposes of computing the profits of the trade to which they are appropriated.


This Schedule came into effect on 2 February 2004 following a commencement order made by the Minister for Finance (S.I. 551 of 2004).

Relevant Date: Finance Act 2020