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Taxes Consolidation Act, 1997 (Number 39 of 1997)

[1]>

541C Tax treatment of certain venture fund managers.

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(1) In this section—

carried interest”, in relation to a relevant investment, means the share of profits (where the share ratio was agreed at the outset of the relevant investment) referred to in paragraph (b) of the definition of “total profits of an investment’ that is received by a company or partnership in respect of the management of the relevant investment;

carried interest to which this section applies”, in relation to a relevant investment, means an amount of carried interest which is not greater than 20 per cent of the total profits from the relevant investment;

innovation activities” means development of new technological, telecommunication, scientific or business processes;

investor”, in relation to a relevant investment, means a person other than a person entitled to carried interest or a person connected with that person;

relevant investment” means an investment, which remains in place for at least 6 years, in unquoted shares or securities of a private trading company and that company is—

(a) carrying on a business set up and commenced on or after 1 January 2009, other than a business—

(i) which was previously carried on by another person and to which the company has succeeded,

(ii) the activities of which were previously carried on as part of another person’s business, or

(iii) which is an excepted trade within the meaning of section 21A,

and

(b) carrying on a business of research, development or innovation activities;

research and development activities” has the same meaning as in section 766(1);

total profits of an investment”, in relation to a relevant investment, means the sum of—

(a) the profits which are attributable to investors in the relevant investment by reference to an agreed initial rate of return, and

(b) the balance of the profits of the relevant investment over and above those calculated by reference to the agreed initial rate of return.

<[2]

[2]>

(1) In this section—

carried interest”, in relation to a qualifying venture capital fund, means the share of profits (where the share ratio was agreed at the commencement of the qualifying venture capital fund) referred to in paragraph (b) of the definition of “total profits” that are received by a company, partnership or individual in respect of the management of the qualifying venture capital fund;

carried interest to which this section applies”, in relation to a qualifying venture capital fund, means an amount of carried interest which is not greater than 20 per cent of the total profits of a qualifying venture capital fund and which is a proportion of carried interest derived from the relevant investment;

EEA Agreement” means the Agreement on the European Economic Area signed in 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;

innovation activities” means development of new technological, telecommunication, scientific or business processes;

investor”, in relation to a relevant investment, means a person other than a person entitled to carried interest or a person connected with that person;

proportion of carried interest derived from the relevant investment” means an amount of carried interest determined by the formula—

A ×

B

C

where—

A is carried interest,

B is the value of all relevant investments in an EEA State [4]>(including the State) of<[4][4]>(including the State), or in the United Kingdom, of<[4] the qualifying venture capital fund, and

C is the value of all relevant investments of the qualifying venture capital fund;

qualifying venture capital fund” means an entity structured in the form of a partnership the main purpose of which is to make relevant investments and where the individuals, companies or partnerships which invest in the partnership are either limited partners or general partners (as defined in the partnership agreement) who are obliged under a legally binding agreement to provide capital sums for investment purposes over a period of time;

relevant investment” means any investment made in unquoted shares or securities of a private trading company on or after 1 January 2009, where the qualifying venture capital fund retains the shares or securities in the company for a period of at least 3 years from the date of the initial investment and that company is—

(a) carrying on a business of research and development activities or innovation activities, and

(b) not carrying on an excepted trade within the meaning of section 21A;

research and development activities” has the same meaning as in section 766(1);

total profits”, in relation to a qualifying venture capital fund, means the sum of—

(a) the profits which are attributable to investors in the fund by reference to an agreed initial rate of return, and

(b) the balance of the profits of the fund over and above those calculated by reference to the agreed initial rate of return.

<[2]

(2) (a) Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, carried interest to which this section applies and which is received by [3]>an individual or<[3] a partnership shall be deemed to be an amount of chargeable gains to which section 28(1) applies.

(b) Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, carried interest to which this section applies and which is received by a company shall be deemed to be an amount of chargeable gains to which section 28(1) applies.

(3) (a) Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, the rate of capital gains tax in respect of chargeable gains to which subsection (2)(a) apply shall be 15 per cent.

(b) Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, the rate of corporation tax in respect of chargeable gains to which subsection (2)(b) apply shall be 12.5 per cent.

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[1]

[+]

Inserted by F(No.2)A08 s41. This section is deemed to have come into force and takes effect as on and from 1 January 2009.

[2]

[-] [+]

Substituted by FA13 s46(a). Deemed to have come into force and takes effect on and from 1 January 2013.

[3]

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Inserted by FA13 s46(b). Deemed to have come into force and takes effect on and from 1 January 2013.

[4]

[-] [+]

Substituted by the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2020 s59. Comes into operation on 31 December 2020 as per S.I. No. 723 of 2020.