Revenue Note for Guidance
This section provides for an exemption from tax in the case of certain capital gains from the disposal of holdings in subsidiaries.
Certain conditions must be met before a gain can be exempt.
The exemption does not apply where the shares are part of a life assurance company’s life business fund nor will it apply to shares which derive the greater part of their value from land or minerals in the State, rights, interests or other assets in relation to mining or minerals or the searching for minerals or exploration or exploration rights relating to gas or oil. Furthermore, the exemption does not apply to deemed disposals under the provisions of section 627. Finally, the exemption does not apply where any of the provisions of the anti-avoidance section 590 apply except where the participator (within the meaning of that section) is a company.
(1)(a) “relevant territory” means a Member State of the EU, a territory with which Ireland has a double tax treaty in force or a territory with which Ireland has signed a double tax treaty which has yet to come into force.
“tax” in relation to a relevant territory other than the State is tax that corresponds to corporation tax in the State.
(1)(b)(i) A company will be regarded as a parent company throughout an uninterrupted period of 12 months throughout which it holds 5 per cent of another company’s share capital. The shares can be held directly or indirectly. The holding must also be a “real” holding i.e. the company must be entitled not only to 5 per cent of the shares but also to 5 per cent of any distribution made by the other company and 5 per cent of the company’s assets on a winding up. Certain provisions of this Act are applied for the purposes of determining whether a company has the required holding.
(1)(b)(ii) In determining whether a company satisfies the holding requirements in subsection (2)(a), a company that is a member of a 51 per cent group will be treated as holding any shares that other members of that group hold and as being entitled to any rights that those other group members are entitled. However, this does not apply in the case of shares held as part of a life business fund of a life assurance company.
(1)(b)(iii) In deciding whether the exemption in subsection (2) applies, the question of whether there is a disposal is to be decided on the facts and without regard to section 584. That section provides that a reorganisation or reduction of share capital is to be treated as not involving any disposal. Where the exemption under subsection (2) applies, the section 584 treatment will not apply.
(1)(b)(iv) Where a company is in liquidation, the fact that the company is in liquidation is ignored for the purposes of this section and entitlement to exemption will be determined on the basis that actions of the liquidator in relation to assets are actions of the company.
(1)(b)(v) Section 616 which would otherwise restrict the measure to companies resident in EEA Member States is disapplied.
(2) A gain by an investor company on the disposal of shares in an investee company will not be a chargeable gain if it meets a number of conditions. The conditions include a shareholding requirement, a requirement concerning the investee company’s residence and a trading requirement.
The investor company must be a parent (defined in subsection (1) as holding 5 per cent) of the investee. To qualify for exemption the disposal must either:
(2)(b) The investee company must be resident in a relevant territory, i.e. an EU Member State, a territory with which Ireland has a double tax treaty in force or a territory with which Ireland has signed a double tax treaty which has yet to come into force.
(2)(c) A requirement for trading at the time of disposal is imposed. This trading requirement can be satisfied by either the investee company or the group. The alternatives are—
(3) There are a number of circumstances in which the exemptions provided by this section and section 626C do not apply. These are as follows:
Relevant Date: Finance Act 2019