Capital Gains Tax

Revenue has received a number of enquiries concerning the application of section 980 TCA 1997 to intra-group transfers of assets qualifying for relief under section 617 of the TCA and wishes to clarify the position in this regard.

Section 980

Section 980 of the Taxes Consolidation Act 1997 provides for the deduction of an amount in respect of capital gains tax - equal to 15% of the purchase price paid for certain specified assets - by the purchaser where a tax clearance certificate is not provided. In such cases, the purchaser must pay the tax deducted to the Collector General and may also be required to forward information in relation to the acquisition of the asset to the Revenue Commissioners. The section does not apply where, inter alia, the consideration for the asset disposed of does not exceed €500,000. The provisions of section 980 apply to the following assets:

• land in the State
• minerals in the State or any mineral or mining rights
• exploration or exploitation rights in a designated area
• unquoted shares deriving their value from the above assets including such shares 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

Revenue will issue a tax clearance certificate - CG50A - to the vendor/agent where either (i) the vendor is resident in the State, (ii) no capital gains tax is due on the disposal or, (iii) the vendor has already paid capital gains tax due on the disposal of the asset and any previous disposal of the asset.

The purpose of the provision is to ensure that CGT payable in relation to non-residents disposing of certain assets will be collected. The provision applies to all disposals although residents disposing of these assets are not required to pay the tax when they obtain the tax clearance certificate, CG50A.

Section 617

Section 617 of the TCA provides that the disposal of a chargeable asset (other than trading stock) within a group of companies is to be treated as having been for a consideration of such an amount that neither a gain nor a loss accrues to the company making the disposal, subject to certain conditions.

In the case of transfers of assets to which section 617 applies, the consideration is deemed to be the original cost of acquiring the asset by the vendor company. Revenue wishes to clarify that this is also to be regarded as the consideration for such transfers for the purposes of section 980 and, where this does not exceed €500,000, the requirement under that section to deduct 15% from the purchase price in respect of capital gains tax or obtain a tax clearance certificate, does not apply.

A number of examples should help illustrate the interaction of the two sections and clarify whether it is necessary to apply for a CG50A in the case of certain intra-group asset disposals:

Example 1

Company A transfers a specified asset to fellow group Company B for €1m. The cost of the asset to Company A was €600,000.

A CG 50A is required because the deemed consideration is €600,000 and greater than the €500,000 threshold provided for in section 980(3).

Example 2

Company A transfers a specified asset to fellow group Company B for €1m. The cost of the asset to Company A was €250,000.

A CG 50A is not required because the deemed consideration is €250,000 and less than the €500,000 threshold provided for in section 980(3).

Example 3

Company A transfers a specified asset to fellow group Company B for €400,000. The cost of the asset to Company A was €700,000.

A CG 50A is required because the deemed consideration is €700,000 and greater than the €500,000 threshold provided for in section 980(3).