Revenue Note for Guidance

The content shown on this page is a Note for Guidance produced by the Irish Revenue Commissioners. To view the section of legislation to which the Note for Guidance applies, click the link below:

Revenue Note for Guidance

628A Deferral of exit tax

Summary

This section provides for a deferral of the charge to tax arising under section 627 where a company ceases to be resident in the State. The section provides migrating companies with options to elect to defer the immediate payment of tax arising where a company migrates its residency to another EU Member State or EEA Member State. The immediate charge to tax may be deferred and paid in 6 equal instalments or within 60 days of the disposal of migrated assets. However, in the case of the latter option, all deferred tax is due and payable on or within a period of 10 years from the date of migration. Interest is payable on or within a period of 10 years from the date of migration. An immediate crystallisation of the relevant tax will arise in the event of the appointment of a liquidator to the migrating company, the migrating company ceasing to be tax resident in an EU or EEA Member State, or if the company fails to pay the tax by the date that it is due and payable. An election for deferral must be made in the company’s final corporation tax return. The migrating company is also required to submit annual statements specifying the company’s current residency and details of any tax due and payable.

Details

Definitions

(1) A number of terms are defined most of which are self explanatory. The following definitions are of particular relevance.

‘disposal of assets’ means a disposal of migrated assets;

‘migrated assets’ means the assets of a migrating company, the chargeable gain on the deemed disposal of which was taken into account in determining the amount of relevant tax;

‘relevant event’ means—

  1. the appointment of a liquidator to the migrating company,
  2. any event under the law of a relevant territory corresponding to the event specified in paragraph (a),
  3. the migrating company ceasing to be resident, under the law of a relevant territory, in that territory for the purposes of tax, and not becoming so resident in another relevant territory for that purpose, or
  4. any failure to pay relevant tax by the date that it becomes due and payable;

‘relevant period’, in respect of which a statement under paragraph (b) of subsection (4) is to be made, is the calendar year immediately preceding the 21-day period in which the statement is to be made, except that in respect of the first such statement of the 5 or 9 statements, as the case may be, referred to in that subsection, such period shall be the period commencing at the migration date and ending on the last day before the beginning of the calendar year in respect of which the next such statement is to be made;

‘relevant tax’ means tax payable, other than tax in respect of the amount of any postponed gain under section 628, which but for section 627 would not be payable by a migrating company for a chargeable period;

‘specified date’ means—

  1. in relation to corporation tax, the last day of the period of 9 months starting on the day immediately following the migration date, but in any event not later than day 23 of the month in which that period of 9 months ends, or
  2. in relation to capital gains tax payable in respect of a year of assessment in which the migration date occurs, 31 October in the tax year following that year;

Deferral of exit tax

(2) A migrating company may elect to pay relevant tax—

  1. in 6 equal annual instalments, the first of which is due and payable on the date the final tax return is due to be made by the migrating company, with the remaining 5 instalments due and payable on the next 5 anniversaries of that date, or
  2. not later than 60 days after the disposal of assets by the migrating company.

Where an election to pay relevant tax by annual instalments is made, then the tax due must be paid in accordance with that instalment arrangement.

(3) Where the election is made to pay relevant tax on the event of a disposal of assets, then it is necessary to identify the portion of the relevant tax appropriate to the disposal, this is achieved by means of the apportionment mechanism set out. Where relevant tax does not become due on or before the 10th anniversary of the date the company ceased to be resident, then the tax is due and payable on the date of the 10th anniversary.

Election on tax return

(4)(a) An election to pay relevant tax, by instalments or on the disposal of assets, must be made in the company’s final tax return. The return must be made electronically and specify —

  • the date the company ceased to be resident in the State,
  • the EU/EEA territory where the company has become resident,
  • the amount of the relevant tax, and
  • the deferral option the company is electing to make.

The company is required to provide any other information that Revenue may require for the purposes of the section.

Annual statements

(4)(b) Irrespective of the type of election made by a migrating company, the company is obliged to make, without notification, an annual statement to Revenue specifying whether the company is treated as tax resident in a Member State or EEA State throughout the period covered by the return.

In the case of companies electing to pay relevant tax by instalments, annual statements are due within 21 days of the end of each of the five calendar years following the year of migration. In the case of a company electing to pay relevant tax on the disposal of assets, annual statements are due within 21 days of the end of each of the nine calendar years following the year of migration.

Companies electing to pay relevant tax on the disposal of assets are required to supply the following additional information in their annual statement —

  • whether any relevant tax became due and payable during the relevant period,
  • the amount of the tax, interest charge, and whether the tax and interest has been paid, and
  • the computation of such tax liability.

Crystallisation of relevant tax

(5) If, at any time within 10 years of the date the company ceasing to be resident in the State, the company ceases to be tax resident in a Member State or EEA State; fails to pay relevant tax due; or a liquidator is appointed to the company, then the relevant tax plus any interest due becomes payable at that time.

Interest and security

(6)& (7) Interest is payable on outstanding relevant tax and is due and payable at the same time as relevant tax is due and payable. The Revenue Commissioners may require security from a company opting to defer tax where, in their opinion, the deferral of relevant tax poses a serious risk to the collection of the tax.

(8)& (9) Relevant tax and interest shall be paid to the Collector-General and is payable without the making of an assessment.

Collection & Recovery of tax

(10) Where a migrating company defaults on its obligation to pay tax, provisions is made for its collection from an Irish resident member of the group or on an Irish resident controlling director of the migrating company.

(11) The collection and recovery provisions of the Corporation Tax Act and Capital Gains Tax apply to the collection and recovery of relevant tax and interest.

Relevant Date: Finance Act 2021