Revenue Note for Guidance

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Revenue Note for Guidance

618 Transfers of trading stock within group


This section sets out the tax treatment of transfers of trading stock within a group. Specifically, it deals with two circumstances, firstly where non-trading stock is transferred within a group for use as trading stock, and secondly the reverse of that situation.


(1) Where a member of a group of companies acquires as trading stock an asset from another member in whose hands the asset was not trading stock, the member acquiring the asset is to be treated as having acquired it otherwise than as trading stock and as having immediately appropriated it to use as trading stock.

The result is that —

  • the company disposing of the asset is treated as having made neither a gain nor a loss on the disposal, and the company acquiring the asset is treated as having —
    • acquired it at the price at which the other company acquired it, and
    • immediately disposed of it at market value with the resultant charge to tax on the chargeable gain.

However, under section 596, the acquiring company is given the option of bringing the asset (now trading stock) into its trading account at its cost to the other company. The actual profit on the disposal would then be a profit on income account.

(2) Where a member of a group of companies transfers an asset out of its trading stock to another member and that other company acquires the asset otherwise than as trading stock, the transferor company is to be treated as having appropriated the asset for some purpose other than trading stock immediately before the transfer and therefore as having acquired it at that time for a consideration equal to the amount brought into its accounts for tax purposes.

The effect of this is that the asset is treated as having been transferred by the transferor company otherwise than out of its trading stock. The amount brought into the accounts for tax purposes then forms the base cost of the asset for the purpose of computing any gain on a subsequent disposal by the transferee company.

(3) The section applies to trades carried on in the State by companies which are resident in EU Member States or in EEA Member States with which Ireland has a tax treaty provided that they are either Irish resident companies or companies resident in other Member States which trade in Ireland through a branch or agency.

Relevant Date: Finance Act 2021