980 Deduction from consideration on disposal of certain assets

Summary

This section provides for the deduction of an amount in respect of capital gains tax from the purchase price of certain specified assets by the purchaser (referred to as “withholding tax”) where a tax clearance certificate is not provided. The amount to be deducted is equal to 15 per cent of the purchase price. The purchaser is required to pay the amount deducted to the Collector-General and is also required to forward information relating to the acquisition of the asset to the Revenue Commissioners. The vendor of the asset is entitled to set off the amount deducted against any capital gains tax due on the disposal. Where a deduction cannot be made from the purchase price because the consideration is in non-monetary form, the purchaser is still required to pay a 15 per cent withholding tax to the Revenue Commissioners which is recoverable by the purchaser from the vendor under this section. Where the vendor produces a tax clearance certificate from an inspector, the vendor is entitled to obtain payment in full. Either the vendor or his/her agent may apply to the inspector for a tax clearance certificate.

The enforcement of a debt security by the National Asset Management Agency (NAMA) or by a 75% subsidiary of NAMA does not constitute consideration for the purposes of the section nor will it be treated as a disposal of an asset.

The production of a current tax clearance certificate already issued to a builder of a new house is sufficient authority to remove the requirement to withhold tax under the section on payment to the builder for the land on which the new house is being, or has been, built.

This section also applies where a capital sum derives from an asset. Even though the person paying the capital sum does not acquire the asset, for the purposes of this section they are treated as purchasing the asset for a price equal to the capital sum.

This section does not apply where the value of the asset disposed of does not exceed €500,000 or €1,000,000 in the case of a house or apartment, where a capital sum derives from a settlement under an insurance policy, or where the vendor is a body specified in Schedule 15. Neither does it apply to a disposal by NAMA or by a 51% subsidiary of NAMA.

The person making the disposal shall provide certain details relating to an asset acquired by way of gift or inheritance if the form on which the application so requires.

Details

Definitions

(1) “designated area” is an area designated by an order under section 2 of the Continental Shelf Act, 1968.

“exploration or exploitation rights” is a right to assets generated from activities relating to exploration or exploitation of the sea bed and its natural resources in designated areas.

“shares” include stock and any security.

(4)(c) “house” includes any building/part of a building used or suitable for use as a dwelling, and any out office, yard, garden or other land pertaining to or usually enjoyed with that building/part of a building.

“new house” means a house which has been developed/is being developed by or on behalf of the vendor but which has not been used at any time before its disposal.

Application

(2) This section applies to assets which are —

• land in the State,
• minerals in the State or any mineral or mining rights,
• exploration or exploitation rights in a designated area,
• (3B) unquoted shares deriving their value from any of the above assets - artificial arrangements involving the transfer of money or other assets so that the value of the shares is derived from those assets are ignored for the purposes of valuing the shares, where the motive for the transfer of assets is the avoidance of tax.
• unquoted shares deriving their value from the above assets acquired on a share-for-share basis on a reorganisation or reduction of share capital, and
• goodwill of a trade carried on in the State.

(3) The section does not apply where the value of the asset disposed of does not exceed €500,000 or €1,000,000 in the case of a house or apartment. If, however, in order to avoid the application of the section, an asset exceeding this value is sold in parts (to the same person or connected persons), then those disposals are to be treated as one disposal.

(3A) Neither does the section apply where the asset vendor is a body specified in Schedule 15, as those bodies are exempt from capital gains tax by virtue of section 610.

Withholding tax

(4)(a) Where an asset to which this section applies is being acquired —

• the purchaser must deduct an amount equal to 15 per cent of the payment for capital gains tax,
• the vendor must allow this deduction, and
• the purchaser, on proof of payment of the deduction to the Revenue Commissioners, is treated as having paid over the total of the sum actually paid over and the amount so deducted in consideration for the asset.

(4)(b) The production by the vendor of a certificate issued under subsection (8) or, where the asset being sold is land on which a new house has been built or is in the course of being built, the production of either that certificate or one of the certificates listed in subsection (8A) is sufficient authority to remove the obligation on the purchaser to withhold tax from the consideration. Where one of these certificates is to be used it must have been issued to the vendor or, in the case of a certificate issued under subsection (8), to either the vendor or his/her agent.

Assessment

(5) Where the purchaser has made a payment to the vendor for the acquisition of an asset to which this section applies and in respect of which the withholding tax has been applied, he/she has 30 days from the date of the payment to—

• deliver to the Revenue Commissioners an account of the payment and of the amount deducted and retained from the payment, and
• pay to the Collector-General an amount of capital gains tax equal to 15 per cent of the amount paid to the vendor for the acquisition of the asset.

(5A) An amount of capital gains tax which has become payable to the Collector-General as a result of subsection (5) shall be—

• payable by the purchaser in addition to any other capital gains tax for which he/she is liable,
• due within 30 days of the time the purchaser pays the vendor for the acquisition of the asset, and
• payable by the purchaser without the making of an assessment.

However, tax which has become due may be assessed on the purchaser if that tax or any part of that tax is not paid on or before the due date.

(6) Where the purchaser fails to deliver an account or where the inspector feels that the account is unsatisfactory the inspector may make an estimated assessment to the best of his/her judgement on the purchaser.

Credit for withholding tax

(7) In computing the total capital gains tax liability of the vendor in respect of a disposal under this section, where an amount of capital gains tax which has become payable by the purchaser to the Collector-General has been paid, the vendor will be credited with that amount of tax on making a claim for such credit.

Tax clearance certificate

(8) A vendor or another person acting under their authority (in this section referred to as an “agent” (e.g. a solicitor or a tax practitioner)) may apply to the inspector for a tax clearance certificate. Where the inspector is satisfied that the person making the application is either the vendor or the vendor’s agent and that any one of the following conditions are satisfied —

• that the vendor is resident in the State,
• that no capital gains tax is due on the disposal, or
• that the vendor has already paid the capital gains tax due on the disposal of the asset and any previous disposals of the asset,

the inspector will issue a certificate to the vendor or agent and a copy of the certificate to the purchaser. This enables the purchaser to be relieved of his/her obligation to deduct the withholding tax. If the application is made by an agent, it must include the name and address of the vendor and, if the vendor is resident in the State, the vendor’s tax reference number (within the meaning of section 885).

(8A)(a) The certificates referred to in subsection (4)(b) (other than a certificate issued under subsection (8)) (see also notes below on subsection (8A)(c)) are:

• A valid certificate of authorisation issued under section 531,
• A valid tax clearance certificate issued under section 1094,
• A valid tax clearance certificate issued under section 1095, or
• If a person has none of these certificates, the certificate provided for in paragraph (b) of this subsection.

(8A)(b) A tax clearance certificate may be issued specifically where the asset being disposed of is land on which a new house has been built or is in the course of being built and where the vendor does not already have either a certificate of authorisation under section 531 or a tax clearance certificate under section 1094 or 1095. This tax clearance certificate is issued on the same basis as a tax clearance certificate is issued for the purposes of section 1095.

(8A)(c) A notification issued, within the previous 12 months, by the Revenue Commissioners under section 530I that the named person is a person to whom section 530G (i.e. a zero rate subcontractor) applies shall be treated as a certificate for the purposes of this subsection.

Application of subsection (8) to corporation tax

(8B) Subsection (8) applies to corporation tax as it applies to capital gains tax and references to capital gains tax in that subsection apply as if they included references to corporation tax.

Procedure where consideration is in a non-monetary form

(9)(a) Special procedures apply in the case of an asset acquired after the 2nd of June 1995, which is an asset to which this section applies (and section 978 does not apply), where the consideration for the asset is such that a deduction cannot be made from it (for example an asset swap or a purchase with shares), and where the vendor does not produce a clearance certificate. Where these circumstances obtain the purchaser must, within 7 days of the acquisition —

• notify the Revenue Commissioners of the acquisition, setting out the asset acquired, the consideration paid, the estimated market value of the asset and the name and address of the vendor, and
• pay the Collector-General 15 per cent of the estimated market value.

(9)(b) Where, by virtue of these requirements capital gains tax is payable by the purchaser, that capital gains tax —

• is payable in addition to any other capital gains tax liabilities that person may have,
• is due within 7 days of the acquisition, and
• is payable without an assessment being made.

Where such payment is not made it may be assessed on the purchaser.

(9)(c) Where a purchaser has so paid an amount of capital gains tax, he/she is entitled to recover a sum of that amount from the vendor as a simple contract debt from a court of competent jurisdiction. However, if the vendor (or his/her agent) has now obtained a clearance certificate issued under subsection (8), the purchaser is not entitled to recover the sum from the vendor but is entitled to be repaid the tax so paid.

(9)(d) Where an asset is acquired by 2 or more persons, then each person is to be assessed and charged in proportion to the amount of the asset they acquired.

(9)(e) Where a purchaser has so paid an amount of capital gains tax and recovered a sum of that amount from the vendor, the Revenue Commissioners will, on receiving proof to that effect, allow a credit to the vendor for the tax paid by the purchaser in determining the total capital gains tax liability of the vendor in respect of the disposal.

Due date for tax

(10) This subsection, which provided that an assessment to withholding tax was due and payable the day after the assessment is made, has been repealed by section 56 of the Finance Act 2007.

Capital sums deriving their value from an asset

(11) Certain disposals of assets do not necessarily involve the acquisition of assets (for example, the redemption of loan notes by the issuing company involves the disposal, but not the acquisition, of assets). In order to ensure that this section applies to the disposal rather than the acquisition of assets provision is made such that where a capital sum derives from an asset, the person paying that capital sum is deemed to have acquired the asset for a consideration equal to the capital sum.

This does not apply to a capital sum which is a settlement under an insurance policy.

(12) The enforcement of a debt security by NAMA or by a company which is a 75% subsidiary of NAMA does not constitute consideration for the purposes of this section.

(13) Subsection (9) does not apply to NAMA or to a 75% subsidiary of NAMA.

(14) This section does not apply to a disposal by a company that would be a company to which section 616(1)(g) relates if the reference in that section to a 75% subsidiary were a reference to a 51% subsidiary.

(15) For the purposes of this section, the enforcement of a debt security by NAMA or by a 75% subsidiary of NAMA will not be treated as a disposal of an asset.

(16) In the case of a disposal to which this section applies, the person who is making the disposal shall provide details (if applicable) on an application being made for a clearance certificate if the form on which the application is made so requires for a certificate referred to in subsection (8) relating to —

• whether or not the asset being disposed of was acquired by way of gift or inheritance,
• the market value of the asset at the date it was so acquired, and
• whether or not gift tax or inheritance tax was paid in respect of the asset.

Relevant Date: Finance Act 2019