Revenue Note for Guidance

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Revenue Note for Guidance

81D Deduction for stock exchange listing expenditure

Summary

Finance Act 2024 introduced section 81D into the TCA 1997 to provide for a corporation tax deduction for expenditure of up to €1 million relating to a first listing on an Irish, EU or EEA stock exchange.

The deduction is available for expenses incurred by a company wholly and exclusively for the purpose of admitting to trading the shares of that company on a regulated market or a multilateral trading facility. The relief is available to investment companies as an expense of management, or to trading companies as a trading deduction, in the accounting period during which the first successful stock exchange listing occurs. Expenses incurred in the year of listing and the previous three years are allowable, subject to the overall €1 million cap.

A deduction is not available where:

  • the listing expenses are allowable under another provision of the Tax Acts,
  • the stock exchange listing does not actually take place,
  • financial instruments other than shares are listed, or
  • the shares of the company have previously been listed on a stock exchange in any jurisdiction in any accounting period.

Relief applies to initial public offerings (IPOs) that take place between 1 January 2025 and 31 December 2029.

Details

Definitions

(1) “Directive” means Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU. This Directive is also known as the Markets in Financial Instruments Directive (MiFID II).

“EEA Agreement” means the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as adjusted by all subsequent amendments to that Agreement.

“EEA state” means a state which is a contracting party to the EEA Agreement. This consists of Ireland and all other Member States of the European Union, Iceland, Norway and Liechtenstein.

“investment company” has the meaning assigned to it by section 83(1). This means any company whose business consists wholly or mainly of the making of investments, and the principal part of whose income is derived from the making of investments.

“listing expenditure” means expenditure incurred by a company wholly and exclusively for the purpose of admitting to trading the shares of the company on a regulated market or a multilateral trading facility. Expenditure that has a dual purpose is not eligible for relief.

“multilateral trading facility” has the same meaning as it has in Article 4(1)(22) of the Directive:

    ‘multilateral trading facility’ or ‘MTF’ means a multilateral system, operated by an investment firm or a market operator, which brings together multiple third-party buying and selling interests in financial instruments – in the system and in accordance with non-discretionary rules – in a way that results in a contract in accordance with Title II of this Directive.

“reference date” means the date on which a company commenced trading or, if the company is an investment company, the date on which the company became an investment company.

“regulated market” has the same meaning as it has in Article 4(1)(21) of the Directive:

    “regulated market” means a multilateral system operated and/or managed by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments – in the system and in accordance with its non-discretionary rules – in a way that results in a contract, in respect of the financial instruments admitted to trading under its rules and/or systems, and which is authorised and functions regularly and in accordance with Title III of this Directive.

“relevant period” means an accounting period of a company plus the three preceding years. If a company only began trading or became an investment company in the preceding three years, then the relevant period applies from the reference date up until the last date of the accounting period.

(2) Subsection (2) sets out the key requirements for when a tax deduction will be available for listing expenditure. Those requirements are as follows:

  1. the shares of a company are admitted to trading on a regulated market or a multilateral trading facility in an EEA state during an accounting period,
  2. the company incurs listing expenditure in relation to the admission to trading during the relevant period, and
  3. tax relief is not otherwise available under the Tax Acts in respect of that listing expenditure in any accounting period.

Where these requirements are met, then tax relief will be granted for the listing expenditure as follows–

  1. the listing expenditure will be allowed as a trading deduction in computing the amount of the profits or gains to be charged to tax under Case I or II of Schedule D, or
  2. where the company is an investment company, the listing expenditure can be added to the expenses of management of the investment company for the purposes of subsections (2) and (3) of section 83.

Relief is given in the accounting period during which the shares of the company are admitted to trading.

(3) Subsection (3) provides that the maximum amount of listing expenditure that can be relieved under subsection (2) is €1 million.

(4) Subsection (4) provides that tax relief under this section only applies to initial listings (IPOs). Relief will not apply to a company where its shares were previously admitted to trading/ listed on a stock exchange in any jurisdiction in any accounting period.

(5) Subsection (5) provides that the section only applies to listings on an EEA stock exchange on or before 31 December 2029.

Relevant Date: Finance Act 2024