608 Superannuation funds

Summary

This section exempts from capital gains tax gains from the disposal of investments held as part of an approved superannuation fund, the assets of a Personal Retirement Savings Account (PRSA) or investments held as part of a cross-border pension scheme to the extent that the income from the investment funds is exempt from income tax. Gains from the disposal of investments of the superannuation fund set up for members of the Houses of the Oireachtas are also exempt. For these purposes, contracts for financial futures or traded options are treated as if they were an investment. Thus, any gains arising to the superannuation fund, the PRSA or cross-border pension scheme from dealing in financial futures and trading options are also exempt.

Details

Definitions and construction

(1)(a) “financial futures” and “traded options” are respectively financial futures and traded options dealt in or quoted on any futures exchange or any stock exchange.

No attempt is made to elaborate on the meaning of the terms in question and they must therefore take their ordinary technical meaning. The generally accepted definitions of futures and options are —

Futures

A futures contract is a binding agreement to buy or sell, through an established exchange at a definite date and at a specified price, a standard quantity of a commodity of predetermined quality under fixed conditions of delivery. In the case of a financial futures, the commodity would be financial paper or currency.

An interest rate futures contract is a fixed, standard agreement between a buyer and a seller for the delivery of a round lot of a specified financial instrument or its cash equivalent, such as a 3 month €deposit or a 20 year government gilt, on a given date at an agreed price.

A currency futures contract is an agreement to deliver, or receive delivery of, a specified amount of a foreign currency, or its cash equivalent, on a fixed date at an agreed exchange rate.

Options

An option grants the holder the right but not the obligation to deal in the underlying instrument at a specified price within a specified time period. Thus, a gilt option confers the right to buy the underlying gilt at any time up to maturity of the option. The holder has the absolute right not to utilise this right to purchase the gilt (or exercise the option). If he fails to exercise the option at or before the maturity date, it expires worthless. A put option confers the right to sell the underlying instrument.

(1)(b) A financial future or traded option is to be treated as an investment for the purposes of subsection (2).

Exemption

(2) Gains on the disposal of investments of the superannuation funds of pension schemes approved by Revenue under section 774, 784(4) or 785(5) or held as PRSA assets (within the meaning of section 787A) are not chargeable gains and are thus exempt from capital gains tax. Schemes approved by Revenue are notified to tax districts by Retirement Benefits District. If there is a doubt as to whether a particular scheme is approved in whole or in part, that District should be consulted.

(2A) Gains on the disposal of investments held as part of a cross-border pension scheme as provided for by section 790B are not chargeable gains and are thus exempt from capital gains tax.

(3) Where part only of a fund is approved by Revenue, gains on disposals of investments are exempt only to the same extent as income from the investments would be exempt from income tax.

(4) The exemption applies also to gains from the disposal of investments of the pension scheme established for members of the Oireachtas.

Relevant Date: Finance Act 2021