Revenue Note for Guidance

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Revenue Note for Guidance

116 Charge of stamp duty

(1) The transactions which are liable to companies capital duty fall into 3 main groups i.e.

  • the formation of a capital company including the conversion into a capital company of a non-capital company (e.g. unlimited company, building society),
  • increasing the issued share capital2 or assets3 of a capital company, and
  • transferring to the State either the effective centre of management or the registered office of a capital company. Subsections (1)(e) and (f) deal with companies whose effective centre of management and registered office are both outside the European Community. If either is transferred to the State the transfer is a transaction giving rise to companies capital duty. Subsections (1)(g) and (h) deal with transfers to the State from another Member State of the effective centre of management or registered office of a capital company which is not considered to be a capital company in that other Member State. If either is transferred to the State the transfer is a transaction giving rise to companies capital duty.

(2) Only the chargeable transactions of a capital company4—

  • with or resulting with an effective centre of management in the State, or
  • with or resulting with a registered office in the State where the effective centre of management is in a third country,

are liable to companies capital duty.

“Effective centre of management” is not defined but essentially it means the location of the day to day running of the company. The registered office is the address of the company as listed on the register of companies in the Companies Registration Office.

The charge to companies capital duty does not extend to—

  • unlimited companies (section 114 (“capital company”)) and contributions by unlimited partners (section 118(2)(b)),
  • the companies listed in sections 115 and 120 (relief may also be available under section 119),
  • shares allotted by a capital company where the effective centre of management of that company is in another Member State (subsection (2)),
  • a capitalisation of profits or reserves i.e. a bonus or scrip issue (subsection (1)(c)),
  • shares issued following a redemption of shares (see section 64(4)5 and (5) and section 65(6) and (7) of the Companies Act, 1963, and section 208(c) and (d) of the Companies Act, 1990),
  • the issue of treasury shares (section 209(5) of the Companies Act, 1990),
  • the issue of loan or debenture stock6 (subsection (1)(c)),
  • a gift of cash with no strings attached (subsections (1)(c) and (d)).

Furthermore, it is the practice of the Revenue Commissioners not to charge companies capital duty when a private unlimited company is being converted into a public unlimited company. Under Irish company law such a conversion must be effected in 2 stages i.e. from private unlimited to public limited and from public limited to public unlimited. The technicality of having to become, albeit for an instant, a limited company is ignored in such cases provided the public limited company registers as a public unlimited company on the same day as the public limited company is registered and that the public limited company conducts no activities - commercial, legal or otherwise - other than those necessary for registration as a public unlimited company.

2 The issued share capital must be increased by the contribution of assets e.g. cash, shares, land.

3 The assets must be in return for rights similar to those normally attaching to shares e.g. voting rights, rights to dividends.

4 A company limited by guarantee (with or without share capital) is a capital company. If the only undertaking by the members of the company is an undertaking to contribute assets on a winding-up no chargeable transaction takes place until the winding-up of the company. If, however, assets are contributed during the lifetime of the company in return for shares or rights, companies capital duty is chargeable in accordance with section 117.

5 Section 64 (as amended by section 119 of the Finance Act, 1990), though repealed by section 220 of the Companies Act, 1990, continues to apply to redeemable preference shares issued by a limited company prior to 1 July, 1991.

6 If the stock is convertible into shares then companies capital duty is chargeable on conversion (section 116(c)).

Relevant Date: Finance Act 2014