632 Transfer of assets by company to its parent company

Summary

This section provides for the deferral of capital gains tax where a company transfers a trading asset to a company which holds all of the securities representing its capital. Such a deferral is required by the Mergers Directive.

Details

(1) Where a company from any Member State disposes of a trading asset used by it for the purposes of a trade carried on by it in the State to a company from any Member State which holds all of the securities representing its capital and the latter company starts to use the asset for a trade carried on by it in the State, the asset is treated as disposed of for a consideration which results in no gain or no loss for capital gains tax purposes. In effect, any gain arising is taken over by the parent company and will be fully taxable when disposed of by that company. This is achieved by applying sections 617 to 619 to such a scenario.

(1)(a) The relief applies only where the parent company commences to use the assets concerned for the purposes of a trade carried on by it in the State.

(1)(b) Precedence to relief under section 631 is given in a situation in which both section 631 and this section apply.

(2) The relief provided is not to be given in circumstances in which relief under section 631 would be denied. These are —

• where the assets are not taken into use by the parent company for the purposes of a trade carried on by it in the State,
• where for any reason the parent company would not be chargeable to capital gains tax on a disposal by it of the assets,
• where the company and the parent company make an election that the reliefs are not to apply.

Relevant Date: Finance Act 2021