Finance Act 2018
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Exit tax, etc. - substitution of new Chapter 2 of Part 20 of Principal Act | ||
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32. The Principal Act is amended, with effect from 10 October 2018, by substituting the following for Chapter 2 of Part 20: | ||
“Chapter 2 | ||
Provisions relating to exit tax, etc. | ||
Charge to exit tax | ||
627. (1) (a) In this section and in sections 628 and 629: | ||
‘designated area’, ‘exploration or exploitation activities’ and ‘exploration or exploitation rights’ have the same meanings respectively as in section 13; | ||
‘Directive’ means Council Directive (EU) 2016/1164 of 12 July 20168 laying down rules against tax avoidance practices that directly affect the functioning of the internal market; | ||
‘exploration or exploitation assets’ means assets used or intended for use in connection with exploration or exploitation activities carried on in the State or in a designated area; | ||
‘market value’ means the amount for which an asset can be exchanged or mutual obligations can be settled between unconnected willing buyers and sellers in a direct transaction; | ||
‘relevant event’ means one of the events referred to in subsection (2); | ||
‘tax’ means corporation tax or capital gains tax chargeable by virtue of subsection (2); | ||
‘the new assets’ and ‘the old assets’ have the meanings respectively assigned to them by section 597; | ||
‘third country’ means a territory other than the State or another Member State; | ||
‘transfer’, in relation to assets, means any transaction whereby (apart from the effect of this section) no liability to corporation tax or capital gains tax in respect of the assets, the subject of the transfer, arises, notwithstanding that those assets remain under the legal or economic ownership of the same entity. | ||
(b) For the purposes of subsection (2), paragraph (c) of section 29(3) shall apply as if the reference in that paragraph to a trade were to a business and as if the references to a branch or agency were to a permanent establishment. | ||
(c) A word or expression that is used in this Chapter and is also used in Article 5 of the Directive shall have the meaning in this Chapter that it has in that Article. | ||
(2) For the purposes of the Capital Gains Tax Acts, a company shall be deemed to have disposed of the assets referred to in paragraph (a) or, as the case may be, (b) or, in the case of paragraph (c), to have disposed of all its assets (other than assets excepted from that paragraph by subsection (6)) and to have immediately reacquired the assets at their market value (at the time of the occurrence of the event concerned) on the occurrence of any of the following events: | ||
(a) the company, being a company that is resident in a Member State (other than the State), transfers assets from a permanent establishment in the State to its head office or to a permanent establishment in another Member State or in a third country; | ||
(b) the company, being a company that is resident in a Member State (other than the State), transfers a business (including the assets of the business) carried on by a permanent establishment of that company in the State to another Member State or to a third country; or | ||
(c) the company ceases to be resident in the State and becomes resident in another Member State or in a third country. | ||
(3) (a) In this subsection ‘relevant assets’ has the same meaning as in section 29(1A)(a). | ||
(b) Subsection (2) shall not apply to— | ||
(i) relevant assets or shares deriving their value or the greater part of their value directly or indirectly from relevant assets (other than shares quoted on a stock exchange), or | ||
(ii) assets referred to in section 29(3)(d). | ||
(c) Section 29(1A)(c) shall apply in calculating the portion of the value of shares attributable directly or indirectly to relevant assets. | ||
(d) This subsection shall be construed as being in addition to the provision, with respect to the interpretation of this section, made by virtue of the definition of ‘transfer’ in subsection (1) and, in particular, the words contained therein concerning non-liability to corporation tax and capital gains tax. | ||
(4) (a) Tax shall, notwithstanding subsection (3) of section 28, be chargeable at the rate of 12. 5 per cent in respect of chargeable gains accruing on a disposal of assets to which subsection (2) applies (in paragraph (b) referred to as a ‘deemed disposal of an asset’), but this is subject to paragraph (b). | ||
(b) A chargeable gain accruing on a deemed disposal of an asset arising from the occurrence of an event referred to in subsection (2) shall be chargeable at the rate specified in subsection (3) of section 28 where the event forms part of a transaction to dispose of the asset and the purpose of the transaction is to ensure the chargeable gain accruing on the disposal of the asset is charged to tax at the rate specified in paragraph (a) rather than the rate specified in subsection (3) of section 28. | ||
(c) In this subsection ‘transaction’ has the meaning assigned to it by section 811C. | ||
(5) Section 597 shall not apply where a company referred to in subsection (2)(c)— | ||
(a) has disposed of the old assets, or of its interest in those assets, before the event referred to in subsection (2)(c), and | ||
(b) acquires the new assets, or its interest in those assets, after that event, | ||
unless the new assets are excepted from this subsection by subsection (6). | ||
(6) Where at any time after the event referred to in paragraph (c) of subsection (2) the company referred to in that paragraph carries on a trade in the State through a permanent establishment— | ||
(a) any assets which, immediately after the event referred to in subsection (2)(c), are situated in the State and are used in or for the purposes of the trade, or are used or held for the purposes of the permanent establishment, shall be excepted from subsection (2), and | ||
(b) any new assets which, after that time, are so situated and are so used or so held shall be excepted from subsection (5), | ||
and references in this subsection to assets situated in the State include references to exploration or exploitation assets and to exploration or exploitation rights. | ||
(7) This section shall not apply to an asset— | ||
(a) which relates to the financing of securities, | ||
(b) which is given as security for a debt, or | ||
(c) where the transfer takes place in order to meet prudential capital requirements or for liquidity purposes, | ||
where the asset is due to revert to the permanent establishment or the company, as the case may be, within 12 months of the transfer. | ||
Value of certain assets to be accepted for purposes of Capital Gains Tax Acts | ||
628. Where exit tax is charged in a Member State (other than the State) in respect of an asset by virtue of Article 5(1) of the Directive, the value of that asset established under the law of that Member State for the purposes of that charge to tax shall be taken, for the purposes of the Capital Gains Tax Acts, as the acquisition cost of that asset unless that value does not reflect its market value. | ||
Deferral of exit tax | ||
629. (1) In this section— | ||
‘2010 Directive’ means Council Directive 2010/24/EU of 16 March 20109 concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures; | ||
‘chargeable period’ means a year of assessment or an accounting period, as the case may be; | ||
‘disposal of assets’ means a disposal of migrated assets; | ||
‘EEA Agreement’ means the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as adjusted by the Protocol signed at Brussels on 17 March 1993; | ||
‘electronic means’ has the meaning assigned to it in section 917EA; | ||
‘migrated assets’ means the assets the chargeable gain on the deemed disposal of which was taken into account in determining the amount of tax; | ||
‘migration date’ means the date on which a disposal is deemed to have been made by virtue of section 627(2); | ||
‘relevant period’, in respect of which a statement under paragraph (b) of subsection (5) is to be made, is the calendar year immediately preceding the 21-day period in which the statement is to be made, except that in respect of the first statement of the 5 statements referred to in that subsection, such period shall be the period commencing on the migration date and ending on the last day before the beginning of the calendar year in respect of which the next statement is to be made; | ||
‘relevant territory’ means a Member State (other than the State) or a third country which is a party to the EEA Agreement that has concluded an agreement with the State or the European Union equivalent to the mutual assistance provided for in the 2010 Directive; | ||
‘specified date’ means— | ||
(a) in relation to corporation tax, the last day of the period of 9 months starting on the day immediately following the relevant event, but in any event not later than day 23 of the month in which that period of 9 months ends, or | ||
(b) in relation to capital gains tax payable in respect of a year of assessment in which the relevant event occurs, 31 October in the tax year following that year. | ||
(2) Subject to the provisions of this section, a company which is chargeable to tax may elect to pay that tax in 6 equal instalments at yearly intervals, the first instalment of which shall be due and payable on the specified date, and the remaining instalments shall be due and payable respectively on each of the next 5 anniversaries of the specified date. | ||
(3) Subsection (2) shall not apply to assets referred to in section 627(2) which have been transferred to a third country unless that country is a party to the EEA Agreement and has concluded an agreement with the State or the European Union equivalent to the mutual assistance provided for in the 2010 Directive. | ||
(4) Where an election is made to pay tax in accordance with subsection (2), that tax shall be payable in 6 equal instalments at yearly intervals in accordance with that subsection. | ||
(5) (a) An election under subsection (2) shall: | ||
(i) be made in the return under section 959I— | ||
(I) where the tax is corporation tax, for the accounting period which ends on the migration date for the company, or | ||
(II) where the tax is capital gains tax, for the year of assessment in which the migration date for the company occurs, | ||
and that return shall be made by electronic means (in accordance with Chapter 6 of Part 38); | ||
(ii) specify— | ||
(I) the migration date, | ||
(II) the relevant territory to which the migrated assets were transferred, | ||
(III) the amount of tax, and | ||
(IV) that an election is being made to pay tax in accordance with section 629 (2) of the Taxes Consolidation Act 1997 ; | ||
and | ||
(iii) provide such other information as may be required by the Revenue Commissioners for the purposes of this section. | ||
(b) Where an election is made to pay tax in accordance with subsection (2), the company concerned shall within 21 days of the end of each of the 5 calendar years which follow the year in which the migration date occurs deliver to the Revenue Commissioners a statement, notwithstanding that the company has not received a notice to prepare and deliver such a statement, by such electronic means and in such form and format as the Revenue Commissioners may specify, in respect of the relevant period, for the purposes of tax— | ||
(i) specifying whether the company is treated under the laws of a relevant territory as resident for the purposes of income tax or corporation tax (or any tax imposed in that territory which corresponds to income tax or corporation tax) in that territory throughout that relevant period, and | ||
(ii) providing such other information as may be required by the Revenue Commissioners for the purposes of this section. | ||
(6) Notwithstanding subsections (2) and (4), if, with respect to the company referred to in section 627(2), any of the events specified in subsection (7) occurs, then any amount of tax which has not been paid at the time of the event, and any interest charged on that amount in accordance with subsection (9), shall become due and payable on the occurrence of that event. | ||
(7) Each of the following is an event referred to in subsection (6): | ||
(a) the assets referred to in section 627(2) are sold or otherwise disposed of; | ||
(b) the assets referred to in section 627(2) are transferred to a third country, but this is subject to subsection (8); | ||
(c) the company ceases to be resident in a Member State and becomes resident in a third country or the business carried on by a permanent establishment of the company is transferred to a third country, but this is subject to subsection (8); | ||
(d) the company becomes insolvent or a liquidator is appointed to the company; or | ||
(e) the company fails to pay the instalments referred to in subsection (2) on the due date and this failure has not been rectified within 12 months of that date. | ||
(8) A reference in subsection (7)(b) or (c) to a third country does not include a reference to a third country that is a party to the EEA Agreement if it has concluded an agreement with the State or the European Union equivalent to the mutual assistance provided for in the 2010 Directive. | ||
(9) (a) Where tax becomes due and payable at any time under this section, simple interest shall be payable on the amount of that tax and shall be calculated, from the specified date until the date of payment, for any day or part of a day during which the amount of tax remains unpaid, at the prevailing rate specified in the Table to subsection (2)(c)(ii) of section 1080, and such interest shall be due and payable when the tax concerned is due and payable. | ||
(b) Interest charged on tax shall be added to each of the instalments referred to in subsection (2) and shall be paid at the same time as such instalment is due. | ||
(10) The Revenue Commissioners may, where it appears to them that the deferral of tax would otherwise present a serious risk to collection of that tax, require a company which has made an election under subsection (2) to give security, or further security, of such amounts and in such form and manner as they may determine, for the payment of tax, within 30 days from the date of service on the company of a notice in writing. | ||
(11) Subsection (10) shall not apply to a company to which section 629A applies. | ||
(12) All amounts of tax and interest shall be paid to the Collector-General. | ||
(13) Any amount of tax and interest payable in accordance with this section shall be payable without the making of an assessment. | ||
(14) (a) The Collector-General may, at any time before the end of the period beginning with the date on which tax was due and payable by reference to this section and ending 3 years after the time when a statement under subsection (5)(b), specifying the amount of that tax, is made and delivered to the Collector-General, serve on— | ||
(i) a company which is or, during the period of 12 months ending with the date when tax became due and payable, was a member of the same group (within the meaning of section 629A(1)) as a company to which section 627(2) applies, or | ||
(ii) a person who is, or during the period mentioned in subparagraph (i) was, a controlling director (within the meaning of section 629A(1)) of a company to which section 627(2) applies, | ||
a notice— | ||
(I) stating the amount which remains unpaid of the tax payable and the date on which the tax became due and payable, and | ||
(II) requiring the company referred to in subparagraph (i) or the person referred to in subparagraph (ii), as the case may be, to pay that amount within 30 days of service of the notice, | ||
and, in the event of the serving of such notice, the amount referred to in subparagraph (I) shall be so payable by the company or person concerned, as the case may be. | ||
(b) Any amount which a person is required to pay by a notice under this subsection may be recovered from the person as if it were tax due by such person, and such person may recover any such amount paid on foot of a notice under this section from the company concerned. | ||
(c) A payment in pursuance of a notice under this subsection shall not be allowed as a deduction in computing income, profits or losses for any tax purposes. | ||
(15) Without prejudice to the provisions of this section, the provisions of the Corporation Tax Acts and the Capital Gains Tax Acts, as appropriate, relating to the collection and recovery of corporation tax, capital gains tax, and interest, shall apply, with any necessary modifications, to the collection and recovery of tax and interest payable in accordance with this section as they apply to any other corporation tax, capital gains tax, and interest. | ||
Tax on non-resident company recoverable from another member of group or from controlling director | ||
629A. (1) In this section— | ||
‘chargeable period’ means a year of assessment or an accounting period, as the case may be; | ||
‘control’ shall be construed in accordance with section 432; | ||
‘controlling director’, in relation to a company, means a director of the company who has control of the company; | ||
‘director’, in relation to a company, has the same meaning as in section 116, and includes any person within section 433(4); | ||
‘group’ has the meaning which would be given by section 616 if in that section references to residence in a relevant Member State were omitted and for references to ‘75 per cent subsidiaries’ there were substituted references to ‘51 per cent subsidiaries’, and references to a company being a member of a group shall be construed accordingly; | ||
‘specified period’, in relation to a chargeable period, means the period beginning with the specified return date for the chargeable period (within the meaning of section 959A) and ending 3 years after the time when a return under Chapter 3 of Part 41A for the chargeable period is delivered to the Collector-General; | ||
‘tax’ means corporation tax or capital gains tax chargeable by virtue of section 627(2); | ||
‘taxpayer company’ means a company which is chargeable to tax by virtue of section 627(2). | ||
(2) This section shall apply at any time on or after 10 October 2018 where tax payable by a company for a chargeable period (in this section referred to as ‘the chargeable period concerned’) is not paid within 6 months after the date on or before which the tax is due and payable. | ||
(3) The Revenue Commissioners may, at any time before the end of the specified period in relation to the chargeable period concerned, serve on any person to whom subsection (4) applies a notice— | ||
(a) stating the amount which remains unpaid of the tax payable by the taxpayer company for the chargeable period concerned and the date on or before which the tax became due and payable, and | ||
(b) requiring that person to pay that amount within 30 days of the service of the notice. | ||
(4) (a) This subsection shall apply to any person, being— | ||
(i) a company which is, or during the period of 12 months ending with the time when the gain accrued was, a member of the same group as the taxpayer company and which is resident in the State, and | ||
(ii) a person who is, or during that period was, a controlling director of the taxpayer company or of a company which has, or within that period had, control over the taxpayer company and who is resident in the State. | ||
(b) This subsection shall apply in any case where the gain accrued before 10 October 2019, with the substitution in paragraph (a)(i) of ‘beginning with 10 October 2018, and’ for ‘of 12 months’. | ||
(5) Any amount which a person is required to pay by a notice under this section may be recovered from the person as if it were tax due by such person, and such person may recover any such amount paid on foot of a notice under this section from the taxpayer company. | ||
(6) A payment in pursuance of a notice under this section shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes. | ||
Transitional provision (power to serve notice under former section 629 not affected) | ||
629B. (1) The substitution of this Chapter effected by section 30 of the Finance Act 2018 does not affect the power of the Revenue Commissioners to serve, on or after 10 October 2018, a notice such as is referred to in subsection (3) of the section 629 that was contained in this Chapter before 10 October 2018 (the ‘former section 629’) and, accordingly, the provisions of the former section 629 shall be deemed to remain in force in respect of tax payable, as referred to in subsection (2) of that section, that has not been paid within the period as specified in that subsection, notwithstanding— | ||
(a) that the date on which that period expires is a date falling on or after 10 October 2018, or | ||
(b) that the date on which the specified period (as defined in the former section 629) in relation to the chargeable period (as defined in that former section) concerned in the matter expires is a date falling on or after 10 October 2018. | ||
(2) This section is without prejudice to the generality of the Interpretation Act 2005 and, in particular, section 27 of that Act as that section relates to a liability arising under the section 627 or 628 that was contained in this Chapter before 10 October 2018. | ||
Company ceasing to be resident on formation of SE or SCE | ||
629C. If at any time a company ceases to be resident in the State in the course of— | ||
(a) the formation of an SE by merger, or | ||
(b) the formation of an SCE, | ||
then, whether or not the company continues to exist after the formation of the SE or (as the case may be) the SCE, the Tax Acts and the Capital Gains Tax Acts shall apply to any obligations of the company under this Act in relation to liabilities accruing and matters arising before that time— | ||
(i) as if the company were still resident in the State, and | ||
(ii) where the company has ceased to exist, as if the SE or (as the case may be) the SCE were the company.”. | ||