Tax Tip: Tax Free Gains

Have your company use the Participation Exemption to generate tax-free gains from the sale of shares that it owns in trading companies.

Gains made on the disposal of certain shares are exempt from Capital Gains Tax provided that the following three main conditions are met:

The shareholding condition: the disposal must have taken place either: at a time when the investor company held at least 5% of the shares in the

investee for a continuous period of 12 months, or within 2 years of that time.

The residence condition: The investee company must be resident in an EU Member State, a territory with which Ireland has a double tax treaty already in force or in a territory with which Ireland has signed a double tax treaty which has yet to come into force.

The trading condition: At the time of disposal of the shares either

  1. the investee company’s business must consist wholly or mainly of the carrying on of a trade or trades, or
  2. in the case of a group, the business of the investor company, each company of which the investor is at least a 5% shareholder, the investee company (if the investor company does not hold at least 5% of its shares) and any company in which the investee holds at least 5% of its shares, taken together must consist wholly or mainly of the carrying on of a trade or trades.

Copyright © 2020 McAvoy & Associates, All rights reserved.


Joe McAvoy

Director

Tax Services

Call: +353 21 432 1321

View Profile

Dara Burke

Director

Tax Services

Call: +353 21 432 1321

View Profile

Shane Carroll

Director

Business Advisory

Call: +353 21 432 1321

View Profile


Related Articles
Tax Tip: CAT reduction

If you can’t avoid a CGT charge on a transfer of an asset to a family member, don’t despair. The person to whom you transfer the asset may claim a ...Continue Reading

Tax Tip: 10% CGT

If you are disposing of either shares in a trading company or the assets of an unincorporated business look to avail of Entrepreneur Relief. By using it the first €1m ...Continue Reading

Tax Tip: Tax Exempt Gains

If you or your company are holding land and buildings acquired between 7 December 2011 and 31 December 2014 gains from their disposal may be free of Capital Gains Tax. ...Continue Reading

Tax Tip: Incorporation

If you are carrying on business as an unincorporated entity consider transferring your business to a company to avail of the low 12.5% corporate tax rate. Given Ireland’s favourable tax ...Continue Reading

Tax Tip: Tax-Deductible Plant

Reduce your taxable profits by claiming capital allowances for all the plant in your building, whether the building is in use for a trade or is an investment asset. While ...Continue Reading

Tax Tip: Working Abroad

If you are expanding your business overseas then you should consider whether any of your employees could avail of the foreign earnings deduction. In order to claim the relief the employee ...Continue Reading