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

137 Disallowance of reliefs in respect of bonus issues


Where the profits of a company are stripped by means of a distribution which is, or arises out of, an issue of bonus shares or the repayment of a security (that is, matters which are treated as a distribution under paragraph (c) or (d) of section 130(2) or section 131 or 132(2)(a)) then, except in so far as any recipient of such a distribution receives a normal return on his/her investment, no account is taken of such a distribution for the purpose of any exemptions, reliefs or set-offs.



(1) This section applies to matters (referred to as a “bonus issue”) treated as distributions by virtue of being —

  • the redemption of bonus issues, and certain interest which is in the nature of a distribution (paragraph (c) or (d) of section 130(2)),
  • a bonus issue following the repayment of share capital (section 131),
  • a payment in repayment of share capital following a bonus issue (section 132(2)(a)).


(2) A bonus issue is, subject to subsection (5), not to be taken into account for any claim for recovery of tax based on —

  • any exemption from tax,
  • the setting-off of losses against profits or income, or
  • the payment of interest.

Franked investment income

(3) A bonus issue is, subject to subsection (5), not treated as franked investment income (that is, income of a company which consists of a distribution) for the purposes of any reliefs available against franked investment income. See note to section 156 for the meaning of franked investment income.

Abatement of restrictions

(5) Excluded from the scope of the preceding provisions is the proportion (if any) of any bonus issue made in respect of any shares or securities which, if the bonus issue were declared a dividend, would represent a normal return on the consideration provided by the recipient for the shares or securities in respect of which the bonus issue was made. If the securities derive from shares or securities previously acquired by the recipient, the normal return is to be related to the earlier acquisition.

Market value

(6) For the purpose of subsection (5), the recipient is taken to have acquired the shares or securities at their market value at the date of acquisition. This applies irrespective of whether the consideration (if any) for the shares or securities was, at the time of acquisition, in excess or below their market value. In determining whether an amount received by way of dividend exceeds a normal return, regard is to be had to the length of time between the receipt of that amount and the time when the recipient first acquired any of the relevant shares or securities. Regard is also to be had to any dividends or other distributions made in respect of them during that period.

Relevant Date: Finance Act 2021