583 Capital distributions by companies

Summary

This section provides the general rule that where a shareholder receives a capital distribution from a company, other than a distribution of certain new shares dealt with in section 584, the distribution is treated as if for its value the shareholder had disposed of part of his/her holding of shares. A “capital distribution” is defined as any distribution from a company (including a distribution on a winding-up) other than a distribution which is treated as income in the hands of the recipient, as, for example, an option to take shares instead of a cash dividend.

Most distributions from Irish resident companies, including capital distributions, are now subject to income tax under the rules of Schedule F (see section 20). However, distributions made in a winding-up of a company are not within the charge to income tax (see section 130(1)). For capital gains tax purposes, capital distributions arise mainly on the winding-up of a company and also in the context of the disposal of rights issues (see section 584(8)) and the provisions dealing with the buy back by a company of its own shares (see Chapter 9 of Part 6).

Details

(1) The term “capital distribution” means any distribution from a company, including a distribution in the course of a winding-up, whether it is in money or money’s worth. A distribution which is chargeable to income tax is not to be regarded as a capital distribution.

(2) Where a person receives or becomes entitled to receive in respect of shares in a company a capital distribution from the company (other than a distribution of new shares for old shares dealt with under section 584), the person is to be treated for capital gains tax purposes as if he/she had made a disposal of an interest in the shares in consideration for the value of the capital distribution made by the company.

Relevant Date: Finance Act 2019