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9 1992

Finance Act, 1992

Chapter V

Implementation of Council Directive No: 90/434/EEC and other related matters

Interpretation (Chapter V).

64. —In this Chapter—

bilateral agreement” means arrangements having the force of law by virtue of section 361 of the Income Tax Act, 1967 ;

company” means a company from a Member State;

company from a Member State” has the meaning assigned to it by Article 3 of the Directive;

the Directive” means Council Directive No. 90/434/EEC of 23 July 1990* , on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States;

Member State” means a Member State of the European Economic Community;

receiving company” means the company to which the whole or part of a trade is transferred in the course of a transfer;

securities” means shares and debentures;

shares” includes stock;

transfer” means the transfer by a company of the whole or part of its trade in the circumstances set out in section 65 (1) or section 69 (1), as the case may be;

transferring company” means the company by which the whole or part of a trade is transferred in the course of a transfer.

Transfer of assets generally.

65. —(1) (a) This section applies where on or after the 1st day of January, 1992, a company transfers the whole of a trade carried on by it in the State to another company and the consideration for the transfer consists solely of the issue to the transferring company of securities (in this section referred to as the “new assets”) in the receiving company.

(b) A company which transfers part of a trade to another company shall be treated for the purposes of this section as having carried on that part of its trade as a separate trade.

(2) (a) The transfer shall not be treated as giving rise to any allowance or charge provided for by section 14 of the Corporation Tax Act, 1976 .

(b) There shall be made to or on the receiving company in accordance with section 14 of the Corporation Tax Act, 1976 , all such allowances and charges as would, if the transferring company had continued to carry on the trade and had continued to use the transferred assets for the purposes of the trade, have fallen to be made to or on it in respect of any assets transferred in the course of the transfer, and the amount of any such allowance or charge shall be computed as if the receiving company had been carrying on the trade since the transferring company began to do so and as if everything done to or by the transferring company had been done to or by the receiving company.

(c) This subsection shall not apply as respects assets transferred in the course of a transfer if in consequence of the transfer, or a transaction of which the transfer is a part, the Corporation Tax Act, 1976 , is to have effect subject to subsections (2) to (5) of section 20 of that Act.

(3) For the purposes of the Capital Gains Tax Acts and, in so far as it applies to capital gains tax, the Corporation Tax Act, 1976

(a) the transfer shall not be treated as involving any disposal by the transferring company, and

(b) the receiving company shall be treated as if the assets transferred to it in the course of the transfer were acquired by it at the same time and for the same consideration at which they were acquired by the transferring company and as if all things done by the transferring company relating to the assets transferred in the course of the transfer had been done by it.

(4) Where, at any time within a period of 6 years commencing on the day on which the assets were transferred in the course of the transfer, the transferring company disposes of the new assets then, for the purposes of the Capital Gains Tax Acts and, in so far as it relates to capital gains tax, the Corporation Tax Acts, in computing any chargeable gain on the disposal of any new assets—

(a) the aggregate of the chargeable gains less allowable losses which, but for paragraph (a) of subsection (3), would have been chargeable on the transferring company shall be apportioned between the new assets as a whole, and

(b) the sums allowable as a deduction under paragraph 3 (1) (a) of Schedule 1 to the Capital Gains Tax Act, 1975 , shall be reduced by the amount apportioned to the new asset under paragraph (a),

and if the securities which comprise the new assets are not all of the same type, the apportionment between the securities under paragraph (a) shall be in accordance with their market value at the time they were acquired by the transferring company.

(5) Subsections (2), (3) and (4) shall not apply if—

(a) immediately after the time of the transfer—

(i) the assets transferred in the course of the transfer are not used for the purposes of a trade carried on by the receiving company in the State,

(ii) the receiving company would not be chargeable to corporation tax or capital gains tax in respect of any chargeable gains accruing to it on a disposal, if it were to make such a disposal, of any assets (other than cash) acquired in the course of the transfer, or

(iii) any of the assets are assets in respect of which, by virtue of being of a description specified in a bilateral agreement, the receiving company falls to be regarded as not liable in the State to corporation tax or capital gains tax on gains accruing to it on a disposal,

or

(b) the transferring company and the receiving company jointly so elect by notice in writing to the inspector, and such notice shall be made by the time by which a return falls to be made by the transferring company under section 10 of the Finance Act, 1988 , for the accounting period in which the transfer takes place.

Transfer of an asset by a company to its parent company.

66. —(1) Where a company disposes of an asset used for the purposes of a trade carried on by it in the State to a company which holds all of the securities representing its capital and the companies would not, but for this section, fall to be treated in accordance with section 130 of the Corporation Tax Act, 1976 , in respect of the said asset, then if—

(a) immediately after the disposal the company acquiring the asset commences to use the asset for the purposes of a trade carried on by it in the State, and

(b) the disposal is not, or does not form part of, a transfer to which section 65 applies,

sections 130, 131 and 132 of the said Act of 1976 shall have effect as if the companies were resident in the State.

(2) Subsection (5) of section 65 shall apply with any necessary adaptation for the purposes of this section as if references in that subsection to subsections (2), (3) and (4) of the said section 65 were references to subsection (1) of this section.

Company reconstruction or amalgamation: transfer of development land.

67. —Where, on or after the 24th day of April, 1992, a company, for the purposes of or in connection with a scheme of reconstruction or amalgamation (within the meaning of subsection (3) of section 127 of the Corporation Tax Act, 1976 ), disposes of an asset which consists of development land (within the meaning of section 36 of the Finance Act, 1982 ) to another company and—

(a) the disposal is not made in the course of a transfer to which section 65 applies, and

(b) the company disposing of the asset and the company acquiring the asset would, if the definition of chargeable gains in subsection (1C) of section 13 (as amended by section 31 of the Finance Act, 1982 ) of the Corporation Tax Act, 1976 , and subsection (4) of section 36 of the Finance Act, 1982 , were deleted, be treated in accordance with subsection (1) of section 127 of the Corporation Tax Act, 1976 , in respect of that asset,

then, the companies shall be treated as if the said asset was acquired by the one company from the other company for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the company making the disposal and, for the purposes of section 3 of the Capital Gains Tax (Amendment) Act, 1978 , the acquiring company shall be treated as if the acquisition of the asset by the other company had been the acquiring company's acquisition of it.

Amendment of section 36 (chargeable gains on disposals of development land) of Finance Act, 1982.

68. Section 36 (as amended by section 60 ) of the Finance Act, 1982 , is hereby amended, as respects disposals on or after the 24th day of April, 1992—

(a) in subsection (5), by the substitution of “sections 130, 134, 135, 136, 137, 138 and 139” for “sections 134, 137, 138 and 139” and the said subsection (5), as so amended, is set out in the Table to this section, and

(b) by the deletion of subsection (7).

TABLE

(5) Sections 130 , 134 , 135 , 136 , 137 , 138 and 139 of the Corporation Tax Act, 1976 , shall apply, with any necessary modifications, in relation to capital gains tax to which a company is chargeable on chargeable gains accruing to it on a relevant disposal as they apply in relation to corporation tax on chargeable gains and references in those sections to corporation tax shall be construed as including references to capital gains tax.

Credit for tax.

69. —(1) Where, on or after the 1st day of January, 1992—

(a) a company which is resident in the State transfers the whole or part of a trade which, immediately before the time of the transfer, it carried on in a Member State, other than the State, through a branch or agency to a company which is not resident in the State,

(b) the transfer includes the whole of the assets of the transferring company used for the purposes of the trade or the part of the trade or the whole of those assets other than cash, and

(c) the consideration for the transfer consists wholly or partly of the issue to the transferring company of securities in the receiving company,

then, tax specified in a relevant certificate given by the tax authorities of the Member State in which the trade was so carried on shall be treated, for the purposes of Part XXII of the Income Tax Act, 1967 , as tax—

(i) payable under the law of that Member State, and

(ii) in respect of which credit may be allowed under a bilateral agreement.

(2) For the purposes of this section—

law of the Member State which has the effect of deferring a charge to tax on a gain” means any law of the Member State concerned which provides—

(a) that the gain accruing to the transferring company on the disposal of the assets in the course of the transfer is to be treated as not accruing until the disposal of the assets by the receiving company, or

(b) that the receiving company is to be treated as having acquired the assets for a consideration of such amount as would secure that, for the purposes of charging the gain on the disposal to tax in that Member State, neither a gain nor a loss would accrue to the transferring company on the transfer and the receiving company is to be treated as if the acquisition of the assets by the transferring company had been its acquisition of them, or

(c) such other deferral of a charge to tax as corresponds to paragraph (a) or (b);

relevant certificate given by the tax authorities of a Member State” means a certificate so given and which states—

(a) whether gains accruing to the transferring company on the transfer would have been chargeable to tax under the law of the Member State but for—

(i) the Directive, or

(ii) any provision of the law of the Member State which has the effect of deferring a charge to tax on a gain in the case of such a transfer,

(b) if the said gains accruing would have been so chargeable, the amount of tax which would have been payable under the said law if, so far as is permitted under that law, any losses arising on the transfer are set against any gains so arising and any deductions and reliefs available to the transferring company under the said law other than the provisions mentioned in paragraph (a), had been claimed.

Avoidance of tax.

70. —Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, sections 65 , 66 , 67 , 68 and 69 shall not have effect as respects a transfer or disposal (as the case may be) unless it is shown that the transfer or disposal is effected for bona fide commercial reasons and does not form part of any arrangement or scheme of which the main purpose, or one of the main purposes, is avoidance of liability to income tax, corporation tax or capital gains tax.

Returns.

71. —(1) Where section 65 , 66 , 67 , 68 or 69 has effect in relation to a transfer or disposal (as the case may be), the transferring company shall make a return, in such form as the Revenue Commissioners may require, of the transfer or disposal to the appropriate inspector.

(2) Where corporation tax or capital gains tax payable by a company falls to be reduced by virtue of section 69 , a return under this section shall include a relevant certificate given by the tax authorities of the Member State in which the trade was carried on immediately before the time of the transfer.

(3) A company shall make a return under this section within 9 months from the end of the accounting period in which the transfer occurs.

(4) In this section “appropriate inspector” shall have the meaning assigned to it in section 9 of the Finance Act, 1988 .

Other transactions.

72. —(1) The Revenue Commissioners may, on an application being made to them in writing in respect of a transaction—

(a) of a type specified in the Directive, and

(b) to which this Chapter does not apply,give such relief as appears to them to be just and reasonable for the purposes of giving effect to the provisions of the Directive.

(2) An application under this section shall be made in such form as the Revenue Commissioners may require.

Amendment of section 132 (disposal or acquisition outside a group) of Corporation Tax Act, 1976.

73. Section 132 (as amended by section 14 of the Capital Gains Tax (Amendment) Act, 1978 ) of the Corporation Tax Act, 1976 , is hereby amended by the insertion of the following proviso after subsection (2)—

“Provided that where at any time after the asset was acquired or provided by the group so taken as a single person and before the 24th day of April, 1992, there was an acquisition (hereafter in this proviso referred to as ‘the later acquisition’) of the said asset by a member of the group from another member of the group as a result of a relevant disposal (within the meaning of subsection (1) of section 36 of the Finance Act, 1982 ), this subsection shall have effect as if the reference to the acquisition or provision of the asset by the group were a reference to the later acquisition or the last such acquisition where there was more than one.”.

Apportionment of amounts.

74. —Where, for the purposes of this Chapter, any sum falls to be apportioned and, at the time of the apportionment, it appears that it is material as respects the liability to tax (for whatever period) of two or more companies, then any question which arises as to the manner in which the sum is to be apportioned shall be determined, for the purposes of the tax of all those companies, by the Appeal Commissioners, who shall determine the question in like manner as if it were an appeal against an assessment, and the provisions of the Income Tax Acts relating to the rehearing of an appeal and the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications:

Provided that all the said companies shall be entitled to appear and be heard by the Appeal Commissioners or to make representations to them in writing.

OJ No. L225, 20 August 1990, page 1.