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Taxes Consolidation Act, 1997 (Number 39 of 1997)

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CHAPTER 2

Provisions where companies cease to be resident in the State

627 Deemed disposal of assets.

[FA97 s42]

(1)(a) In this section and in section 628—

"designated area", "exploration or exploitation activities" and "exploration or exploitation rights" have the same meanings respectively as in section 13;

"exploration or exploitation assets" means assets used or intended for use in connection with exploration or exploitation activities carried on in the State or in a designated area;

"market value" shall be construed in accordance with section 548;

"the new assets" and "the old assets" have the meanings respectively assigned to them by section 597.

(b) For the purposes of this section and section 628, a company shall not be regarded as ceasing to be resident in the State by reason only that it ceases to exist.

(2)(a) In this subsection—

"control" shall be construed in accordance with subsections (2) to (6) of section 432 as if in subsection (6) of that section for "5 or fewer participators" there were substituted "persons resident in a relevant territory";

"excluded company" means a company of which not less than 90 per cent of its issued share capital is held by a foreign company or foreign companies, or by a person or persons directly or indirectly controlled by a foreign company or foreign companies;

"foreign company" means a company which—

(i) is not resident in the State,

(ii) is under the control of a person or persons resident in a relevant territory, and

(iii) is not under the control of a person or persons resident in the State;

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"relevant territory" means—

(i) the United States of America, or

(ii) a territory with the government of which arrangements having the force of law by virtue of section 826 have been made.

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"relevant territory" means a territory with the government of which arrangements having the force of law by virtue of [2]>section 826<[2] [3]>[2]>section 826(1)(a)<[2]<[3] [3]> section 826(1)<[3] have been made.

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(b) Subject to paragraph (c), this section and section 628 shall apply to a company (in this section referred to as a "relevant company") if at any time (in this section and in section 628 referred to as "the relevant time") on or after the 21st day of April, 1997, the company ceases to be resident in the State.

(c) This section and section 628 shall not apply to a company which is an excluded company.

(3) A relevant company shall be deemed for the purposes of the Capital Gains Tax Acts—

(a) to have disposed of all its assets, other than assets excepted from this subsection by subsection (5), immediately before the relevant time, and

(b) to have immediately reacquired them,

at the market value of the assets at that time.

(4) Section 597 shall not apply where a relevant company—

(a) has disposed of the old assets, or of its interest in those assets, before the relevant time, and

(b) acquires the new assets, or its interest in those assets, after the relevant time,

unless the new assets are excepted from this subsection by subsection (5).

(5) Where at any time after the relevant time a relevant company carries on a trade in the State through a branch or agency—

(a) any assets which, immediately after the relevant time, are situated in the State and are used in or for the purposes of the trade, or are used or held for the purposes of the branch or agency, shall be excepted from subsection (3), and

(b) any new assets which, after that time, are so situated and are so used or so held shall be excepted from subsection (4),

and references in this subsection to assets situated in the State include references to exploration or exploitation assets and to exploration or exploitation rights.

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Chapter 2

Provisions relating to exit tax, etc.

627. Charge to exit tax

(1) (a) In this section and in sections 628 and 629:

"designated area", "exploration or exploitation activities" and "exploration or exploitation rights" have the same meanings respectively as in section 13;

"Directive" means Council Directive (EU) 2016/1164 of 12 July 20161 laying down rules against tax avoidance practices that directly affect the functioning of the internal market;

"exploration or exploitation assets" means assets used or intended for use in connection with exploration or exploitation activities carried on in the State or in a designated area;

"market value" means the amount for which an asset can be exchanged or mutual obligations can be settled between unconnected willing buyers and sellers in a direct transaction;

"relevant event" means one of the events referred to in subsection (2);

"tax" means corporation tax or capital gains tax chargeable by virtue of subsection (2);

"the new assets" and "the old assets" have the meanings respectively assigned to them by section 597;

"third country" means a territory other than the State or another Member State;

"transfer", in relation to assets, means any transaction whereby (apart from the effect of this section) no liability to corporation tax or capital gains tax in respect of the assets, the subject of the transfer, arises, notwithstanding that those assets remain under the legal or economic ownership of the same entity.

(b) For the purposes of subsection (2), paragraph (c) of section 29(3) shall apply as if the reference in that paragraph to a trade were to a business and as if the references to a branch or agency were to a permanent establishment.

(c) A word or expression that is used in this Chapter and is also used in Article 5 of the Directive shall have the meaning in this Chapter that it has in that Article.

(2) For the purposes of the Capital Gains Tax Acts, a company shall be deemed to have disposed of the assets referred to in paragraph (a) or, as the case may be, (b) or, in the case of paragraph (c), to have disposed of all its assets (other than assets excepted from that paragraph by subsection (6)) and to have immediately reacquired the assets at their market value (at the time of the occurrence of the event concerned) on the occurrence of any of the following events:

(a) the company, being a company that is resident in a Member State (other than the State), transfers assets from a permanent establishment in the State to its head office or to a permanent establishment in another Member State or in a third country;

(b) the company, being a company that is resident in a Member State (other than the State), transfers a business (including the assets of the business) carried on by a permanent establishment of that company in the State to another Member State or to a third country; or

(c) the company ceases to be resident in the State and becomes resident in another Member State or in a third country.

(3) (a) In this subsection "relevant assets" has the same meaning as in section 29(1A)(a).

(b) Subsection (2) shall not apply to—

(i) relevant assets or shares deriving their value or the greater part of their value directly or indirectly from relevant assets (other than shares quoted on a stock exchange), or

(ii) assets referred to in section 29(3)(d).

(c) Section 29(1A)(c) shall apply in calculating the portion of the value of shares attributable directly or indirectly to relevant assets.

(d) This subsection shall be construed as being in addition to the provision, with respect to the interpretation of this section, made by virtue of the definition of "transfer" in subsection (1) and, in particular, the words contained therein concerning non-liability to corporation tax and capital gains tax.

(4) (a) Tax shall, notwithstanding subsection (3) of section 28, be chargeable at the rate of 12.5 per cent in respect of chargeable gains accruing on a disposal of assets to which subsection (2) applies (in paragraph (b) referred to as a "deemed disposal of an asset"), but this is subject to paragraph (b).

(b) A chargeable gain accruing on a deemed disposal of an asset arising from the occurrence of an event referred to in subsection (2) shall be chargeable at the rate specified in subsection (3) of section 28 where the event forms part of a transaction to dispose of the asset and the purpose of the transaction is to ensure the chargeable gain accruing on the disposal of the asset is charged to tax at the rate specified in paragraph (a) rather than the rate specified in subsection (3) of section 28.

(c) In this subsection "transaction" has the meaning assigned to it by section 811C.

(5) Section 597 shall not apply where a company referred to in subsection (2)(c)—

(a) has disposed of the old assets, or of its interest in those assets, before the event referred to in subsection (2)(c), and

(b) acquires the new assets, or its interest in those assets, after that event,

unless the new assets are excepted from this subsection by subsection (6).

(6) Where at any time after the event referred to in paragraph (c) of subsection (2) the company referred to in that paragraph carries on a trade in the State through a permanent establishment—

(a) any assets which, immediately after the event referred to in subsection (2)(c), are situated in the State and are used in or for the purposes of the trade, or are used or held for the purposes of the permanent establishment, shall be excepted from subsection (2), and

(b) any new assets which, after that time, are so situated and are so used or so held shall be excepted from subsection (5),

and references in this subsection to assets situated in the State include references to exploration or exploitation assets and to exploration or exploitation rights.

(7) This section shall not apply to an asset—

(a) which relates to the financing of securities,

(b) which is given as security for a debt, or

(c) where the transfer takes place in order to meet prudential capital requirements or for liquidity purposes,

where the asset is due to revert to the permanent establishment or the company, as the case may be, within 12 months of the transfer.

1 OJ No. L193, 19.7.2016, p.1

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Substituted by FA98 sched3(5).

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Substituted by FA04 sched3(1)(q). This section shall have effect as on and from 25 March 2004

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Substituted by FA07 sched2(1)(u). Has effect as on and from 2 April 2007

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Substituted by FA18 s32. Comes into effect from 10 October 2018.