Transferring assets between Group Companies: What are the potential Irish Tax implications which need to be considered?

The transfer of assets between companies within a group structure can give rise to a number of tax implications.  It is important that the possible Capital Gains Tax, Corporation Tax, Stamp Duty and Value Added Tax implications be considered in advance of transferring assets between group companies.  Below we discuss these possible implications in detail.

Capital Gains Tax (CGT)

Section 617 TCA 1997 provides that when two companies form part of a Capital Gains Tax group and where certain conditions are satisfied, the transfer of a ‘chargeable’ asset (not including trading stock) can be treated as occurring at no gain/no loss for Irish CGT purposes.  Certain conditions must be satisfied in order to qualify for this relief.  The following transactions do not qualify for this relief:

• The payment of another group company’s debt;

• The redemption of shares and

• Transfers that are essentially capital distributions.  

In some situations, groups may opt out of this CGT no gain/no loss treatment for intangible assets so that the acquiring company can access capital allowances instead.  

Section 623 TCA 1997 also needs to be considered which outlines the clawback legislation in relation to this relief.   If a company availed of the relief outlined above and it ceases to be a member of the group within 10 years after the acquisition while continuing to retain the asset, the original relief will be subject to a clawback.

As mentioned above, early tax advice is recommended.  If you would like to receive further details in relation to what qualifies as a Capital Gains Tax group and Sections 617/623 TCA 1997, we, at Accounting Bureau, would be more than happy to assist you.

Corporation Tax (CT)

There are a number of CT issues which need to be considered in advance of transferring assets between group companies. These include, but are not restricted to the following:

• Does the transfer represent a discontinuation of a trade and what are the related CT tax implications e.g. can any losses be utilised/carried forward?

• Do capital allowance implications need to be considered?  Where Capital allowances are relevant, can an election be made to transfer the asset at tax written down value rather than open market value?

• In the case of trading stock, should the stock be transferred at market value or can an election be made to substitute the higher of the cost or actual consideration.

Once again, early advice is recommended in relation to the potential CT implications of transferring assets between group companies and we at Accounting Bureau would be more than happy to assist.

Stamp Duty

It is always important to assess any stamp duty implications arising on the transfer of assets between group companies and to examine if there are any reliefs/exemptions available on the transfer.  Potentially available reliefs/exemptions include, but are not restricted to, that of section 79 SDCA 1999 associated companies relief, section 88 SDCA 1999 for the transfer of certain stocks or marketable securities and section 101 SDCA 1999 in respect of the transfer of intellectual property.

We, at Accounting Bureau, would be delighted to assist you in examining whether stamp duty would apply on the potential transfer of assets and whether there are any reliefs/exemptions available in respect of same.

Value Added Tax (VAT)

One of the most important VAT issues to consider in relation to the transfer of assets between group companies is whether the transfer qualifies for Transfer of Business (TOB) relief in accordance with sections 20(2)(c) VATCA2010 and 26 VATCA 2010.  

When assets, including goodwill and stock, are transferred as a going concern to another accountable person and the business is capable of being continued by the person acquiring those assets, and where that transfer is not made by means of a share transfer, this will not be deemed a ‘supply’ for Irish VAT purposes.  This is provided certain conditions are satisfied.  If these conditions are satisfied, no VAT will be payable on the transfer.

For more details on this relief and others, please do not hesitate to contact us at Accounting Bureau for assistance.