Tax on corporate transactions in Ireland: overview

A Q&A guide to tax on corporate transactions in Ireland.

The Q&A gives a high level overview of tax in Ireland and looks at key practical issues including, for example: the main taxes, reliefs and structures used in share and asset sales, dividends, mergers, joint ventures, reorganisations, share buybacks, private equity deals and restructuring and insolvency.

To compare answers across multiple jurisdictions, visit the Tax on corporate transactions Country Q&A tool.

The Q&A is part of the Multi-jurisdictional Guide to Tax on Transactions. For a full list of jurisdictional Q&As visit www.practicallaw.com/taxontransactions-mjg.

Contents

Tax authorities

1. What are the main authorities responsible for enforcing taxes on corporate transactions in your jurisdiction?

The Office of the Revenue Commissioners (Irish Revenue) is responsible for enforcing all taxes and duties in Ireland including those relevant to corporate transactions.

 

Pre-completion clearances and guidance

2. Is it possible to apply for tax clearances or obtain guidance from the tax authorities before completing a corporate transaction?

Ireland has no legislative system that provides for pre-transaction clearance or rulings. It is possible to seek Irish Revenue's opinion in relation to the tax consequences of a particular transaction in advance of the transaction taking place, but these opinions are not legally binding. However, provided that the request for an opinion submitted to Irish Revenue contains all of the relevant facts and circumstances in relation to the transaction, the opinion of Irish Revenue in relation to the transaction should not change.

 

Main taxes on corporate transactions

Transfer taxes and notaries' fees

3. What are the main transfer taxes and/or notaries' fees potentially payable on corporate transactions?

Stamp duty

Key characteristics. Stamp duty is the principal transfer tax and is a tax on certain instruments (such as written documents).

Triggering event. A document is chargeable to stamp duty, unless exempted, where the document is both:

  • Of a type set out in Schedule 1 to the Stamp Duties Consolidation Act 1999 (SDCA). This lists the different categories of document to which stamp duty applies. This includes conveyances or transfers on sale of stocks or marketable securities and property.

  • Executed in Ireland or, if executed outside Ireland, relates to something done or to be done in Ireland.

Liable party/parties. Generally, the purchaser or transferee is liable to pay stamp duty arising on a written instrument and a return must be filed and stamp duty paid within 30 days of the execution of the instrument.

Applicable rate(s). Stamp duty is charged on the higher of the consideration paid for, or the market value of, the relevant asset. The main categories of instrument to which stamp duty applies and the applicable rates of duty are as follows:

  • Transfers of shares or marketable securities: 1%.

  • Transfers of non-residential property (including assets and other moveable goods): 2% (before 7 December 2011, rates of up to 6% applied).

  • Transfers of residential property:

    • 1% on consideration up to EUR1 million;

    • 2% on balance of consideration in excess of EUR1 million.

  • Premiums on leases of buildings, land and other real property: 1% or 2%.

  • Additional stamp duty is also chargeable on the average annual rent reserved by the lease at rates from 1% to 12% depending on the term of the lease:

    • leases not exceeding 35 years: 1%;

    • leases of between 25 and 100 years: 6%;

    • leases exceeding 100 years: 12%.

For exemptions and reliefs see Question 10, Stamp duty reliefs.

 

Corporate and capital gains taxes

4. What are the main corporate and/or capital gains taxes potentially payable on corporate transactions?

Corporation tax

Key characteristics. Corporation tax is chargeable on the worldwide profits of Irish tax resident companies. Companies that are not resident in Ireland are subject to corporation tax on profits arising from a trade carried on in Ireland through a branch or agency.

A company that is incorporated in Ireland is automatically deemed to be resident in Ireland for tax purposes. In all other cases residence is based on where the company is centrally managed and controlled.

Triggering event. Corporation tax (and corporation tax on capital gains) is charged on the profits and gains of companies arising in the relevant accounting period and based on the company’s accounts in that period. Profit, for the purpose of corporation tax, consists of the trading and passive income of the company as well as any chargeable (that is, capital) gains arising in the tax year.

Liable party/parties. See above, Key characteristics.

Applicable rate(s). Trading income (including certain qualifying foreign dividends where paid out of trading profits) is taxed at Ireland's low 12.5% rate of corporation tax. Non-trading or passive income is taxed at 25% and capital gains are taxed at 33%.

There is an exemption from corporation tax for new companies that start to trade before 31 December 2014. Subject to certain conditions, the exemption applies for the first three years of trading. The maximum annual tax liability for which shelter is available is EUR40,000. Following the Finance Act 2011, the amount of relief the company is entitled to is linked to the amount of Pay Related Social Insurance (PRSI) paid by the company in respect of its employees (employer's PRSI). The company will be entitled to EUR5,000 relief for each employee in respect of whom it pays employer's PRSI, subject to a maximum of EUR40,000.

There are various other reliefs and exemptions available to trading companies, including capital allowances in respect of plant and machinery, industrial buildings and intellectual property, tax credits for research and development activities and relief for interest on borrowings incurred in the acquisition of shares in certain companies.

Capital gains tax/corporation tax on capital gains

Key characteristics. Irish tax resident companies are liable to capital gains tax (CGT) on the disposal of worldwide assets. Non-Irish tax resident companies are liable for gains arising on the disposal of certain assets including:

  • Land and buildings in Ireland.

  • Minerals in Ireland and rights or interests associated with mining for or searching for minerals in Ireland.

  • Exploration or exploitation rights in the Irish Continental Shelf.

  • Unquoted shares or securities deriving their value or the greater part of their value directly or indirectly from the above assets.

  • Assets situated in Ireland that are used, held or acquired for business carried on in Ireland through a branch or agency.

  • Assets of a life assurance company that are situated outside Ireland but held in connection with the life business carried on by the company in Ireland that were used or held by or for the purposes of that company's branch or agency in Ireland.

Triggering event. CGT generally arises on the disposal of an asset. The chargeable gain is computed by deducting the costs of acquisition and disposal and the costs of any enhancement expenditure from the sales proceeds received on disposal.

CGT can also arise on certain events that are deemed to constitute disposals. These include situations where a company ceases to be a member of a group of companies or where certain value shifting acts occur with the effect of passing value from one shareholder to another.

CGT is aggregated by reference to the chargeable gains and allowable losses of a chargeable person in the particular tax year. Capital losses arising in a tax year can be set off against chargeable gains arising in the same year and any unutilised losses can be carried forward indefinitely.

Liable party/parties. Generally, it is the person disposing of the chargeable asset who is liable to pay CGT. However, where any of the assets listed below are disposed of, the person paying the consideration may be required to withhold CGT at 15% from the consideration:

  • Land and buildings in Ireland.

  • Minerals in Ireland and rights or interests associated with mining for or searching for minerals in Ireland.

  • Exploration or exploitation rights in the Irish Continental Shelf.

  • Unquoted shares or securities deriving their value or the greater part of their value directly or indirectly from the above assets.

  • Assets situated in Ireland that are used, held or acquired for the purposes of a business carried on in Ireland through a branch or agency.

  • Goodwill of a trade carried on in Ireland.

No deduction is required where the consideration is less than EUR500,000 or where the person disposing of the relevant asset obtains a clearance certificate from Irish Revenue. A clearance certificate will be issued where Irish Revenue are satisfied that:

  • The person making the disposal is Irish tax resident.

  • The tax does not arise on the disposal.

  • The tax has already been discharged.

There are a number of exemptions and reliefs from CGT (see Question 10, CGT exemptions and reliefs).

Applicable rate(s). CGT applies at a current rate of 33% on the disposal of assets.

 

Value added and sales taxes

5. What are the main value added and/or sales taxes potentially payable on corporate transactions?

Value added tax (VAT)

Key characteristics. VAT is an EU transaction-based tax that is chargeable on the supply of goods and services in Ireland by a taxable person in the course or furtherance of a business carried on by him. VAT is also chargeable on:

  • Goods imported into Ireland from outside the EU.

  • The purchase of certain services from suppliers outside Ireland.

  • The intra-EU acquisition of goods.

Any person carrying on business in Ireland whose annual turnover from taxable supplies exceeds certain thresholds (EUR75,000 for persons supplying goods and EUR37,500 for persons supplying services) must register for and charge Irish VAT. In addition, foreign traders who supply certain goods in Ireland may also be required to register for Irish VAT.

Triggering event. As set out above, VAT is chargeable on the supply of goods and services in Ireland by a taxable person in the course or furtherance of a business carried on by him.

Liable party/parties. Persons in business in Ireland generally charge VAT on the supplies they make and are entitled to a credit against this amount for any VAT charged to them on business purchases. Accountable persons must then either pay the balance to Irish Revenue or seek a refund of any VAT due to them using bi-monthly VAT returns.

Applicable rate(s). The rates of VAT vary as follows:

  • The standard VAT rate is 23% and applies to supplies of goods and services not subject to the rates below (legal services are subject to VAT at the standard rate).

  • The 13.5% rate applies to supplies of land and property, electricity, gas, heating fuel, waste disposal and short-term car hire.

  • A 9% rate was introduced in 2011 for certain tourism related services including the supply of holiday accommodation, admissions to cinemas, theatres, certain musical performances, museums, art gallery exhibitions, printed material such as newspapers and periodicals and facilities for taking part in sporting activities. This reduced rate was due to expire on 31 December 2013 but has now been extended indefinitely.

  • A rate of 4.8% applies to the supply of livestock and greyhounds and hire of horses.

  • The 0% rate applies to certain food and drink, exports, books, oral medicine and children's clothing and footwear.

  • The supply of the following goods and services are exempt from VAT:

    • most banking, insurance and financial activities;

    • medical services;

    • education and training services;

    • passenger transport.

 

Other taxes on corporate transactions

6. Are any other taxes potentially payable on corporate transactions?

Certain taxes, including interest withholding tax, dividend withholding tax (see Question 8), professional services withholding tax and relevant contract tax may be payable depending on the nature of the transaction and the type of business carried on by the parties to the transaction.

In addition, capital acquisitions tax (CAT) or gift tax at a current rate of 33% can apply where certain dispositions are deemed to constitute gifts. However, there are a number of reliefs and exemptions, which mean that CAT should not apply to corporate transactions.

 

Taxes applicable to foreign companies

7. In what circumstances will the taxes identified in Questions 3 to 6 be applicable to foreign companies (in other words, what "presence" is required to give rise to tax liability)?

Stamp duty

Stamp duty attaches to written documents and is not affected by the residence of the parties to that document. A document of a type specified in the legislation is chargeable to Irish stamp duty where it is either executed in Ireland or, if executed outside Ireland, relates to something done or to be done in Ireland (see Question 3).

Corporation tax

Companies not resident for tax purposes in Ireland are not subject to Irish corporation tax unless they carry on a trade in Ireland through a branch or agency (see Question 4).

CGT/corporation tax on chargeable gains

Non Irish tax resident companies are liable for gains arising on the disposal of certain specified assets (see Question 4).

VAT

The application of VAT to a supply of goods or services depends on the place of supply of those goods or services and the tax residence of the parties to the transaction will not determine whether VAT is imposed.

CAT

A charge to CAT can arise where one of the following conditions is satisfied:

  • The disponer (that is, the person providing the benefit of the gift or inheritance) is resident or ordinarily resident in Ireland at the date of the gift or inheritance.

  • The beneficiary is resident or ordinarily resident in Ireland on the date of the gift or inheritance.

  • The subject matter of the gift or inheritance is situated in Ireland.

 

Dividends

8. Is there a requirement to withhold tax on dividends or other distributions?

Dividend withholding tax (DWT) at the standard income tax rate of 20% applies to dividends and distributions made by Irish tax resident companies.

However, there are a wide range of exemptions from DWT where the dividend or distribution is paid by the tax resident company to certain persons, including:

  • Another Irish tax resident company.

  • Companies resident in an EU member state (other than Ireland) or a country with which Ireland has concluded a double tax treaty and are not controlled by Irish residents.

  • Companies that are under the control, directly or indirectly, of a person or persons who are resident in an EU member state or a country with which Ireland has concluded a double tax treaty and are not controlled by persons not so resident.

  • Companies whose shares are substantially and regularly traded on a recognised stock exchange in another EU member state or country with which Ireland has concluded a double tax treaty or where the recipient company is a 75% subsidiary of such a company or is wholly owned by two or more such companies.

  • A company resident in another EU member state with at least a 5% holding in the Irish paying company (under Directive 90/435/EEC on the taxation of parent companies and subsidiaries (Parent-Subsidiary Directive)).

  • Relief under a double tax treaty with Ireland may also be available.

 

Share acquisitions and disposals

Taxes potentially payable

9. What taxes are potentially payable on a share acquisition/share disposal?

Corporation tax

An Irish tax resident company that trades in shares and financial assets may be subject to corporation tax on the income arising from the disposal of shares that form part of the trading assets of the company.

CGT/corporation tax on capital gains

An Irish tax resident company disposing of shares held as an investment may be subject to CGT/corporation tax on capital gains arising on a disposal.

A non-tax resident company is only liable to CGT on the disposal of certain specified assets (see Question 4, Capital gains tax/corporation tax on capital gains).

A purchaser may be required to withhold CGT of 15% of the consideration paid for shares where the consideration exceeds EUR500,000 and the shares derive the greater part of their value from specified assets (see Question 4, Capital gains tax/corporation tax on capital gains).

Stamp duty

Stamp duty at a rate of 1% of the higher of the market value of or the consideration paid for shares may be payable by the purchaser or transferee (see Question 3).

 

Exemptions and reliefs

10. Are any exemptions or reliefs available to the liable party?

CGT exemptions and reliefs

There are various exemptions and reliefs available from CGT including:

  • Substantial shareholding exemption. Disposals by a company of a substantial shareholding in a subsidiary company that is resident in an EU member state or a country with which Ireland has concluded a double tax treaty are exempt from CGT if, at the time of the disposal:

    • the subsidiary company carries on a trade or is part of a trading group;

    • the disposing company holds or has held at least 5% of the ordinary share capital and economic interest in the subsidiary company for 12 months beginning not more than two years before the disposal.

  • Group relief. Relief is available from CGT where both the company disposing of the shares and the company acquiring the asset are within a CGT group. A CGT group consists of a principal company and all its effective 75% subsidiaries provided that both the principal and subsidiary company are EU or EEA resident. In addition, the shares must be within the charge to corporation tax on capital gains both before and after the transfer.

    The effect of the relief is that both the company disposing and the company acquiring the asset are treated as if the shares were acquired for such consideration as would secure that neither a gain nor a loss would accrue to the disposing company (that is, the acquiring company takes the shares at the same base cost as applied to the disposing company).

  • Paper-for-paper reconstructions. Where shares are transferred as part of a bona fide scheme of reconstruction or amalgamation and certain additional conditions are met, no CGT arises for the disposing shareholders and the acquiring shareholder are deemed to have been received those shares on the same date and at the same cost as the old shares. The relief will only apply where the company acquiring the shares has, or as a result of the transaction will have, control of the target company or where the share-for-share exchange results from a general offer made to the members of the target company.

Stamp duty reliefs

There are numerous reliefs and exemptions available from stamp duty, including:

  • Group relief. Relief is available from stamp duty for transfers between bodies corporate where at the time of execution of the transfer document the transferor and transferee are 90% associates, meaning that one of the following conditions applies:

    • one is the beneficial owner of not less than 90% of the ordinary share capital of the other;

    • one is beneficially entitled to not less than 90% of the profits of the other available for distribution to the shareholders;

    • one is beneficially entitled to not less than 90% of the assets of the other available for distribution to the shareholders on a winding up; or

    • a third body corporate is beneficially entitled to 90% of the ordinary share capital, profits and assets available for distribution of both the transferor and transferee.

      The 90% association must be maintained for a period of two years from the date of execution of the transfer document.

  • Reconstruction or amalgamation relief. Relief may be available from stamp duty on a share-for-share exchange that is a bona fide reconstruction or amalgamation. Various conditions must be met including:

    • a company with limited liability must be registered or must increase its share capital with a view to the acquisition of not less than 90% of the issued share capital of the target company;

    • the acquiring company must be incorporated in an EU member state (including Ireland);

    • where shares are to be acquired, not less than 90% of the consideration for the acquisition must consist of the issue of shares in the acquiring company to the holder of shares in the target company in exchange for the shares in the target company; and

    • the acquiring company must retain the shares in the target company for at least two years.

  • Various other reliefs and exemptions are available including:

    • an exemption on the sale, transfer or other disposition of intellectual property including any patent, copyright, registered design, trade mark, design right, invention and domain name;

    • an exemption on the transfer of shares in a foreign company;

    • an exemption on the conveyance or transfer of a very wide range of financial services instruments and financial products;

    • an exemption on the transfer of certain assets including aircraft and engines.

 

Tax advantages/disadvantages for the buyer

11. Please set out the tax advantages and disadvantages of a share acquisition for the buyer.

Advantages

The advantages of a share sale for the buyer include:

  • Stamp duty is payable at a rate of 1% by a purchaser on the acquisition of shares whereas the rate of stamp duty payable on acquisition of non-residential property assets of a business is 2%.

  • Trading losses existing in the target company can be offset against future corporation tax liabilities of the target, subject to certain conditions.

  • No VAT is payable on the transfer of shares.

Disadvantages

The disadvantages of a share sale for the buyer include:

  • No capital allowances or tax depreciation is available on the purchase of shares.

  • If the target has previously acquired an asset intra-group, there may effectively be a deemed disposal of that asset (a de-grouping charge) and a consequent liability for the target if assets have previously been transferred intra-group.

  • Absent the deemed disposal referred to above, the acquiring company does not benefit from any step up in the base cost of the assets of the target company.

  • The acquiring company inherits the tax history of the target company.

 

Tax advantages/disadvantages for the seller

12. Please set out the tax advantages and disadvantages of a share disposal for the seller.

Advantages

The advantages of a share sale for the seller include:

Disadvantages

The disadvantages of a share sale for the seller include that the selling company will generally be required to provide extensive covenant and warranty protection relating to tax to the acquiring company.

 

Transaction structures to minimise the tax burden

13. What transaction structures (if any) are commonly used to minimise the tax burden?

Where substantial shareholding exemption is not available (see Question 10, CGT exemptions and reliefs: Substantial shareholding exemption), the target company may pay out a large pre-sale dividend to reduce the potential CGT liability arising on a share sale.

Depending on the transaction structure, it may be possible to make use of the reliefs available from CGT and stamp duty for reconstructions and amalgamations to reduce the potential tax liability (see Question 10, CGT exemptions and reliefs: Reconstruction or amalgamation relief).

 

Asset acquisitions and disposals

Taxes potentially payable

14. What taxes are potentially payable on an asset acquisition/asset disposal?

CGT/corporation tax on chargeable gains

An Irish tax resident company may be subject to CGT/corporation tax on capital gains on disposals of business assets that are capital in nature. Non-tax resident companies are only liable to CGT on the disposal of specified assets. A purchaser may be required to withhold CGT at a rate of 15% (see Question 4, Capital gains tax/corporation tax on capital gains).

Stamp duty

Stamp duty, at a rate of up to 2% on residential and non-residential property assets may be payable by the purchaser in an asset acquisition (see Question 3, Stamp duty).

VAT

The sale or transfer of assets may be subject to VAT as a supply of goods or services (see Question 5, Value added tax (VAT)).

Capital allowances

Where assets are disposed of that qualify for capital allowances, the disposal may result in either a:

  • Balancing charge being payable where assets are sold for an amount in excess of their tax written down value.

  • Balancing allowance being due where the assets are sold for less than their tax written down value.

 

Exemptions and reliefs

15. Are any exemptions or reliefs available to the liable party?

CGT exemptions and reliefs

Reorganisation relief. Relief from CGT on the disposal of assets may be available where the transaction is structured as a reconstruction or amalgamation and the relevant conditions are fulfilled. Broadly, where the target company's assets (which must comprise an undertaking or part of an undertaking) are transferred to the acquiring company in exchange for the issue of shares in the acquiring company to the shareholders of the target company (a three-way share-for-undertaking transaction) then:

  • No CGT arises for the target company as it is deemed to have disposed of the assets at such a cost that no gain or loss is realised.

  • No CGT arises to the shareholders in the target company.

  • The acquiring company takes the assets at the original base cost of those assets to the target company.

In order for the relief to apply both the target company and the acquiring company must be resident in an EU member state (including Ireland) at the time of the transfer and the assets must be within the charge to CGT before and after the transfer.

A two-way share-for-undertaking structure where the target company transfers an undertaking or part of an undertaking to another company and that acquiring company issues shares directly to the target company and not to its shareholders does not qualify for the same relief from CGT.

Where a person acquires any land or building situated in any EEA state between 7 December 2011 and 31 December 2014 and holds this property for at least seven years, any gain arising will be exempt from CGT. Where the land is held for longer than seven years the relief is pro-rated.

Stamp duty reliefs

Relief may be available from stamp duty through:

  • Group relief. Relief from stamp duty is available for transfers between bodies corporate which are 90% associated in terms of ordinary share capital, profit and assets available for distribution (see Question 10, Stamp duty reliefs: Group relief).

  • Reconstruction or amalgamation relief. This relief (see Question 10, Stamp duty reliefs: Reconstruction or amalgamation relief) can apply to three- or two-way share-for-undertaking transactions where the relevant conditions are met, including:

    • a company with limited liability must be registered or must increase its share capital with a view to the acquisition of the undertaking or part of the undertaking of an existing company;

    • the acquiring company must be incorporated in an EU member state (including Ireland); and

    • where an undertaking is to be acquired, not less than 90% of the consideration for the acquisition must consist of the issue of shares in the acquiring company to the target company or to the holder of shares in the target company.

VAT

Relief may be available from VAT on an asset transfer between entities if the assets that are transferred form part of a business that is capable of operation as a going concern.

 

Tax advantages/disadvantages for the buyer

16. Please set out the tax advantages and disadvantages of an asset acquisition for the buyer.

Advantages

The advantages of an asset sale for the buyer include:

  • The buyer may be able to claim capital allowances on the cost of acquisition of assets.

  • The tax history and historic tax liabilities of the business stays with the selling group.

  • The buyer may obtain a step-up in base cost of the assets being acquired, which may result in a lower CGT liability on a future disposal when compared to a share sale.

Disadvantages

The disadvantages of an asset sale for the buyer include that the stamp duty rate applicable on an asset acquisition (2%) is higher than the rate applicable to a share acquisition (1%). Stamp duty can be minimised by novating the benefit of contracts (rather than by assigning) and by arranging for assets to pass by delivery where title to those assets is capable of passing by delivery.

 

Tax advantages/disadvantages for the seller

17. Please set out the tax advantages and disadvantages of an asset disposal for the seller.

Advantages

The advantages of an asset sale for the seller include:

  • Capital losses on a sale of assets may be available to the seller to offset capital gains for CGT purposes.

  • The sale of certain assets may trigger a clawback of allowances previously claimed (balancing allowances).

  • Generally, where a purchaser acquires assets, the seller will not be required to provide covenant and warranty cover as the historic tax liabilities of the business remain with the selling group.

Disadvantages

The disadvantages of an asset sale for the seller include:

  • The sale may trigger a balancing charge.

  • An asset sale can lead to potential double taxation in the selling group:

    • the seller may be liable to CGT or corporation tax on chargeable gains on the disposal of the assets;

    • the shareholders in the selling company may be liable to income tax on distribution of the sales proceeds.

 

Transaction structures to minimise the tax burden

18. What transaction structures (if any) are commonly used to minimise the tax burden?

The reliefs from CGT, stamp duty and VAT as described at Questions 10 and 15 may be available if the transaction is structured correctly.

 

Legal mergers

Taxes potentially payable

19. What taxes are potentially payable on a legal merger?

Irish legislation does not contain provision for domestic mergers without liquidation of one of the parties to the merger.

However, Ireland has implemented Directive 2009/133/EC on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares concerning companies of different member states through the EC Cross-Border Merger Regulations 2008 (SI No. 157 of 2008). The purpose of the Regulations and Directive is to facilitate mergers between different types of limited liability companies within the EU by providing for tax neutrality in relation to cross-border mergers, transfers of assets, exchanges of shares and divisions between companies resident in different EU member states.

Three types of merger are possible under the EU regime:

  • Merger by acquisition.

  • Merger by formation of a new company.

  • Merger by absorption.

The effect of transferring assets, exchanging shares or dividing companies may have CGT, stamp duty and VAT consequences (see Question 20).

 

Exemptions and reliefs

20. Are any exemptions or reliefs available to the liable party?

There are specific reliefs on the exchange of shares and transfers of assets by way of merger (see Questions 10 and 15). In addition, Irish Revenue has general authority to grant the reliefs provided by EU legislation (see Question 19) (if implementing legislation does not specifically provide for a particular relief). An application can be made to Irish Revenue for this.

The effect of the reliefs means that no tax arises on the transfer of all or part of one company to another in exchange for shares in the second company (which then trades), and no tax arises on the transfer of the assets. These reliefs apply to cross-border mergers (that is, transactions between companies from two different member states) and to transfers between two Irish companies.

There is a stamp duty exemption for the transfer of assets under a merger or cross-border merger in accordance with the relevant EU legislation.

 

Transaction structures to minimise the tax burden

21. What transaction structures (if any) are commonly used to minimise the tax burden?

The main purpose of the relief provided by EU legislation (see Question 20) is to allow cross-border mergers falling within the regime to be tax neutral. The implementing legislation contains specific reliefs to reflect this, as well as giving Irish Revenue general authority to grant any reliefs described in the EU legislation but which have not been given specific effect in Ireland.

In general, transactions would be structured to take advantage of existing domestic reliefs such as reorganisation relief and reconstruction relief that already cover many of the transactions contemplated by the cross border merger regime.

 

Joint ventures

Taxes potentially payable

22. What taxes are potentially payable on establishing a joint venture company (JVC)?

The transfer of assets or shares from one joint venture party to a JVC can trigger liability to CGT or corporation tax on capital gains for the selling party (see Question 4).

The JVC may be liable to stamp duty on the acquisition of assets or shares as part of the establishment (see Question 3).

VAT may also be payable where assets are transferred to a JVC on its formation (see Question 5).

 

Exemptions and reliefs

23. Are any exemptions or reliefs available to the liable party?

Depending on the structure of the transaction, it may be possible to claim relief from CGT, corporation tax on capital gains, stamp duty and VAT under reconstruction or amalgamation relief (see Questions 10 and 15).

 

Transaction structures to minimise the tax burden

24. What transaction structures (if any) are commonly used to minimise the tax burden?

If a JVC transaction is structured as a reconstruction or amalgamation, it may be possible to minimise the tax burden (see Questions 10 and 15).

 

Company reorganisations

Taxes potentially payable

25. What taxes are potentially payable on a company reorganisation?

The taxes listed at Questions 3 to 6 (that is, CGT or corporation tax on capital gains, stamp duty and VAT) may be payable on a company reorganisation.

 

Exemptions and reliefs

26. Are any exemptions or reliefs available to the liable party?

Relief may be available on CGT, corporation tax on capital gains, stamp duty and VAT depending on the structure of the reorganisation. In particular, paper-for-paper relief (see Question 10, CGT exemptions and reliefs: Paper for paper reconstructions and Question 15, CGT exemptions and reliefs) and reconstruction or amalgamation relief (see Question 10, Stamp duty reliefs: Reconstruction or amalgamation relief and Question 15, Stamp duty reliefs) may be available.

 

Transaction structures to minimise the tax burden

27. What transaction structures (if any) are commonly used to minimise the tax burden?

In order to minimise the tax burden, a reorganisation may be structured to qualify for the various reliefs described in Questions 10 and 15.

 

Restructuring and insolvency

28. What are the key tax implications of the business insolvency and restructuring procedures in your jurisdiction?

There are three key corporate insolvency procedures in Ireland:

  • Liquidation/winding-up.

  • Receivership.

  • Examinership.

Tax implications for the business

Liquidation/winding-up. The process of winding up a company involves the appointment of a liquidator whose job is to:

  • Manage the orderly dissolution of the business.

  • Distribute the assets of the company.

  • Facilitate the payment of the company's creditors in accordance with the order of priorities.

When the winding up process begins, a company's current accounting period automatically comes to an end. The company also ceases to be the beneficial owner of its assets, which can have consequences for corporation tax group relief and group payment purposes (although not for CGT). For corporation tax purposes, trading losses will not be available for transfer to other members of the group following liquidation.

If the liquidator disposes of the company's assets in the course of the winding up (whether by transfer to a third party or by in specie distribution to the company's shareholders) the company is treated as having disposed of those assets and is liable for any CGT arising. However, relief may apply as for CGT purposes, a company does not cease to be a member of a CGT group, solely for being wound up. Therefore, it may be possible to transfer assets to the company's shareholders without triggering a CGT liability.

Stamp duty may also become payable on the transfer of assets to a third party or in specie. The liquidation of a company may trigger the clawback of CGT and stamp duty reliefs previously claimed. For stamp duty purposes, a company in liquidation does not have beneficial title to its assets and therefore cannot claim group relief (see Question 10, Stamp duty reliefs: Group relief). In addition, group relief previously claimed may be clawed back where the 90% association is broken due to liquidation within two years of a transfer. It may be possible to apply to Irish Revenue for concessionary treatment in advance of liquidation in respect of these points.

The liquidator is also obliged to register and account for VAT in relation to all disposals. Where a company is insolvent and is a member of a VAT group, joint and several liability applies.

Receivership. A receiver, unlike a liquidator, is an agent of the company and is appointed by a secured creditor in respect of particular charged assets. The receiver's objective is to manage the charged assets and realise sufficient return to discharge the amount owing to the creditor. The tax consequences of the appointment of a receiver are generally not significant.

Examinership. An Irish incorporated company can undergo examinership (similar to the UK concept of administration). Examinership is a form of court protection which allows a company to continue trading under protection of the court. An examiner may be appointed on the application of an insolvent company to protect its assets for a 70-day period (which can be extended for not more than a further 30 days). The company usually enters into a scheme of arrangement with its creditors under which the liabilities of the company are written down. The claims of Irish Revenue as a creditor of the company may also be compromised in the course of an examinership.

The appointment of an examiner results in the end of an accounting period and any tax arising during the examinership must be accounted for by the company.

Tax implications for the owners

Liquidation/winding-up. A distribution of cash or assets to the shareholders of a company can give rise to a CGT charge for those shareholders.

Receivership. The tax consequences of the appointment of a receiver are generally not significant.

Examinership. As examinership is simply a court sanctioned period of protection for a company from its creditors, there are no implications for the owners of the company and the company is liable for any taxes arising during the period of examinership in the normal way.

Tax implications for the creditors

Liquidation/winding-up. Where a liquidator or receiver disposes of an asset in the course of a winding up or receivership, the liquidator/receiver and any person entitled to an asset by way of security or entitled to the benefit of a charge or encumbrance to an asset may be liable for any capital gains tax arising on that disposal. The tax charge is calculated by reference to the base cost and so on of the original debtor.

There may also be legal implications for creditors on a liquidation in terms of where a creditor falls in the order of priorities. Irish Revenue is a preferred creditor in liquidation situations.

Receivership. See above, Tax implications for the creditors, Liquidation/winding-up.

Examinership. There are no specific tax consequences for creditors on examinership.

 

Share buybacks

Taxes potentially payable

29. What taxes are potentially payable on a share buyback? (List them and cross-refer to Questions 3 to 6 as appropriate.)

CGT/corporation tax on capital gains

The tax implications arising on a share buyback differ according to whether or not the company is listed.

Unlisted/unquoted company. CGT treatment (see Question 4) can apply to the person making the disposal on a buyback where certain conditions are met, including:

  • The acquisition is made by either an unquoted trading company or an unquoted holding company of a trading group.

  • The transaction is carried out for the purpose of benefiting the trade carried on by the company making the acquisition or by any of its 51% subsidiaries.

  • It does not form part of a scheme or arrangement the main purpose of which is to avoid the treating of the receipt as a dividend.

  • The seller of the shares is resident and ordinarily resident in Ireland.

  • The shares have been held by the seller for at least five years before disposal.

  • The shareholder's interest in the acquiring company or the group to which the acquiring company belongs must be substantially reduced as a result of the buyback.

Where the buyback does not satisfy these conditions, distribution treatment will apply and dividend withholding tax may apply (see below, Dividend withholding tax).

Listed/quoted company. The redemption, repayment or purchase by a quoted company of its own shares is not treated as a distribution and instead is treated as a disposal of those shares by the shareholders. Therefore any gain arising to the shareholders is subject to CGT.

Dividend withholding tax

Unlisted/unquoted company. Where an unquoted company redeems, repays or purchases its own shares, the premium paid to the person disposing of their shares is treated as a distribution and taxed as such (see Question 8).

If the conditions for capital gains treatment (see above, CGT/corporation tax on capital gains: Unlisted/quoted company) do not apply, the person making the disposal may be subject to dividend withholding tax. Any amount paid by the acquiring company for its own shares over the amount of new consideration received by it on the initial issue of the shares is treated as a distribution.

Listed/quoted company. The redemption, repayment or purchase by a quoted company of its own shares is subject to CGT (see above, CGT/corporation tax on capital gains: Listed/quoted company).

Stamp duty

For both quoted and unquoted companies, stamp duty is payable if the transfer of shares is effected by way of written instrument falling within Schedule 1 SDCA. If the share certificates are transferred by delivery with no written instrument effecting the transfer, there should be no charge to stamp duty.

 

Exemptions and reliefs

30. Are any exemptions or reliefs available to the liable party?

CGT/corporation tax on capital gains

If the buyback satisfies the conditions to be treated as a disposal for CGT purposes, substantial shareholding exemption may be available (see Question 10).

Dividend withholding tax

If distribution treatment applies, exemption may be available from dividend withholding tax and income tax provided both companies are Irish resident. There are various exemptions from the requirement to withhold dividend withholding tax (see Question 8).

Stamp duty

If no stock transfer form is executed and share certificates are transferred by delivery it may be possible to avoid stamp duty. In addition, where the buyback is structured as a share redemption that would involve converting the shares that are being bought back into redeemable shares, these shares may be redeemed without giving rise to a stamp duty charge.

 

Transaction structures to minimise the tax burden

31. What transaction structures (if any) are commonly used to minimise the tax burden?

The differing treatments that can apply to a share buyback for an unquoted company can present planning opportunities on the basis that:

  • Distribution treatment may be more favourable for a body corporate or institutional shareholder where the exemption from dividend withholding tax and income tax applies for distributions between Irish resident companies.

  • CGT treatment may be more favourable to individual shareholders.

 

Private equity financed transactions: MBOs

Taxes potentially payable

32. What taxes are potentially payable on a management buyout (MBO)?

Depending on whether an MBO is structured as a share or asset acquisition, CGT or corporation tax on capital gains, stamp duty and VAT may be payable in respect of the transaction (see Questions 9 and 14).

The acquisition of shares or other securities by management can result in employment taxes arising at the time of acquisition and/or on certain later events, particularly if the shares are acquired at an undervalue or are convertible or forfeitable. This can result in an obligation for the employer company to account for employment taxes.

 

Exemptions and reliefs

33. Are any exemptions or reliefs available to the liable party?

The reliefs from CGT or corporation tax on capital gains, stamp duty and VAT (see Questions 10 and 15) may be available on an MBO, depending on the structure of the transaction.

 

Transaction structures to minimise the tax burden

34. What transaction structures (if any) are commonly used to minimise the tax burden?

To use the reliefs described at Questions 10 and 15, an MBO may be structured as a qualifying reconstruction or amalgamation.

 

Reform

35. Please summarise any proposals for reform that will impact on the taxation of corporate transactions.

There are no current published proposals for reform of the taxes or reliefs described above in respect of corporate transactions.

 

Contributor profiles

Andrew Quinn

Maples and Calder

T +353 1 619 2038
E andrew.quinn@maplesandcalder.com
W www.maplesandcalder.com

Professional qualifications. Ireland, 1995; England and Wales, 1996 (non-practising)

Areas of practice. Irish and international tax; advising corporations, investment funds and banks on Ireland's international tax offerings. Head of Tax at Maples and Calder.

Recent transactions

  • Advising Avoca Capital on its acquisition by US private equity firm KKR.

  • Advising Intermediate Capital Group in relation to the establishment and launch of a CLO vehicle St Paul's III CLO. JP Morgan acted as book runner and placement agent for the transaction.

  • Advising China Investment Corporation and the Irish National Pension Reserve Fund (NPRF) on the establishment of the China Ireland Technology Growth Capital Fund, co-managed by West Summit Capital and Atlantic Bridge.

William Fogarty

Maples and Calder

T +353 1 619 2730
E william.fogarty@maplesandcalder.com
W www.maplesandcalder.com

Professional qualifications. Ireland, 2003; England and Wales, 2004 (non-practising)

Areas of practice. Tax; cross-border corporate and finance transactions; private equity, investment funds and banking transactions.

Recent transactions

  • Advising Marathon Asset Management, a US-based investment group on their recent Irish and UK loan and property acquisitions.

  • Advising UK private equity funds on the tax implications of acquiring commercial property into an Irish QIAIF structure.

  • Advising China Investment Corporation and the Irish National Pension Reserve Fund (NPRF) on the establishment of the China Ireland Technology Growth Capital Fund, co-managed by West Summit Capital and Atlantic Bridge.

  • Advising Goldman Sachs International on a CLO transaction involving the establishment and launch of the CHC Cordatus Loan Fund III Limited.

Lynn Cramer

Maples and Calder

T +353 1 619 2066
E lynn.cramer@maplesandcalder.com
W www.maplesandcalder.com

Professional qualifications. Ireland, 2009

Areas of practice. Corporate; investment funds and financial services tax matters; tax aspects of corporate transactions; employee remuneration and share schemes.

Recent transactions

  • Advising Marathon Asset Management, a US-based investment group on their recent Irish and UK loan and property acquisitions.

  • Advising Patron Capital Advisers LLP on the VAT implications of acquiring commercial property into an Irish QIAIF structure.

  • Advising Intermediate Capital Group in relation to the establishment and launch of a CLO vehicle St Paul's III CLO. JP Morgan acted as book runner and placement agent for the transaction.


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