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20 1975

CAPITAL GAINS TAX ACT, 1975

PART VIII

Miscellaneous and Supplemental

Double taxation relief.

38. —(1) For the purposes of giving relief from double taxation in relation to capital gains tax charged under the law of any country outside the State, in section 361 of, and Schedule 10 to, the Income Tax Act, 1967 , as they apply for the purposes of income tax, for references to income there shall be substituted references to capital gains, and for references to income tax there shall be substituted references to capital gains tax meaning, as the context may require, tax charged under the law of the State or tax charged under the law of a country outside the State.

(2) So far as by virtue of this section capital gains tax charged under the law of a country outside the State may be brought into account under the said provisions of the Income Tax Act, 1967 , as applied by this section, that tax, whether relief is given by virtue of this section in respect of it or not, shall not be taken into account for the purposes of those provisions as they apply apart from this section.

(3) Section 361 (7) of the Income Tax Act, 1967 (disclosure of information for purposes of double taxation), shall apply in relation to capital gains tax as it applies in relation to income tax.

Disposals to State, charities and other bodies.

39. —(1) Where a disposal of an asset is made otherwise than under a bargain at arm's length—

(a) to the State,

(b) to a charity, or

(c) to any of the bodies falling within section 28 (3) of the Finance Act, 1931 (national institutions and other public bodies),

section 9 (consideration deemed to be equal to market value) shall not apply, but if the disposal is for no consideration or for a consideration not exceeding the sums allowable as a deduction under paragraph 3 of Schedule 1, then—

(i) the disposal and acquisition shall be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal, and

(ii) where, after the disposal, the asset is disposed of by the person who acquired it under the disposal, its acquisition by the person making the earlier disposal shall be treated for the purposes of this Act as the acquisition of the person making the later disposal.

(2) Where under subsection (3) or (5) of section 15, any assets or parts of any assets forming part of settled property are deemed to be disposed of and re-acquired by the trustee, and—

(a) where the assets deemed to be disposed of under section 15 (3) are re-acquired on behalf of the State, a charity or a body falling within the said section 28 (3); or

(b) the assets which or parts of which are deemed to be disposed of and re-acquired under section 15 (5) are held for the purposes of the State, a charity or a body falling within the said section 28 (3);

then, if no consideration is received by any person for or in connection with any transaction by virtue of which the State, the charity or other body becomes so entitled or the assets are so held, the disposal and acquisition of the assets to which the State, the charity or other body becomes so entitled or of the assets which are held as mentioned in paragraph (b) shall be treated for the purposes of this Act as made for such consideration as to secure that neither a gain nor a loss accrues on the disposal.

Assets of insolvent persons.

40. —(1) In relation to assets held by a person as trustee or assignee in bankruptcy or under a deed of arrangement, this Act shall apply as if the assets were vested in, and the acts of the trustee or assignee in relation to the assets were the acts of, the bankrupt or debtor (acquisitions from or disposals to him by the bankrupt or debtor being disregarded accordingly), and tax in respect of any chargeable gains which accrue to any such trustee or assignee shall be assessable on and recoverable from him.

(2) Assets held by a trustee or assignee in bankruptcy or under a deed of arrangement at the death of the bankrupt or debtor shall for the purposes of this Act be regarded as held by a personal representative of the deceased and—

(a) subsection (1) shall not apply after the death, and

(b) section 14 (1) (under which assets passing on a death are deemed to be acquired by the persons on whom they devolve) shall apply as if any assets held by a trustee or assignee in bankruptcy or under a deed of arrangement at the death of the bankrupt or debtor were assets of which the deceased was competent to dispose and which then devolved on the trustee or assignee as if he were a personal representative.

(3) Assets vesting in a trustee in bankruptcy after the death of the bankrupt or debtor shall for the purposes of this Act be regarded as held by a personal representative of the deceased, and subsection (1) shall not apply.

(4) In this section “deed of arrangement” means a deed of arrangement to which the Deeds of Arrangement Act, 1887, applies.

Liquidation of companies.

41. —Where assets of a company are vested in a liquidator under section 230 of the Companies Act, 1963 , or otherwise, this Act shall apply as if the assets were vested in, and the acts of the liquidator in relation to the assets were the acts of, the company (acquisitions from or disposals to him by the company being disregarded accordingly).

Funds in court.

42. —(1) In this section—

funds in court” means any monies (and investments representing such monies), annuities, stocks, shares or other securities standing or to be placed to the account of the Accountant in the books of the Bank of Ireland or any company, and includes boxes and other effects;

the Accountant” means the Accountant attached to the court or a deputy appointed by the Minister for Justice;

court”, except where the reference is to the Circuit Court, means the High Court.

(2) For the purposes of section 8 (3), funds in court shall be regarded as held by the Accountant as nominee for the persons entitled to or interested in the funds, or as the case may be for their trustees.

(3) Where funds in court standing to an account in the books of the Accountant are invested or, after investment, are realised, the method by which the Accountant effects the investment or the realisation of investments shall not affect the question whether there is for the purposes of this Act an acquisition, or as the case may be a disposal, of an asset representing funds in court standing to that account, and, in particular, there shall for those purposes be an acquisition or disposal of assets notwithstanding that the investment of funds in court standing to an account in the books of the Accountant, or the realisation of funds which have been so invested, is effected by setting off, in the Accountant's accounts, investment in one account against realisation of investments in another.

(4) This section shall apply with any necessary modifications to funds in the Circuit Court as it applies to funds in court.

Unremittable gains.

43. —(1) In this section—

particular gains” means chargeable gains accruing from the disposal of assets situated outside the State, the amount of which is, or is included in, the amount (in this section referred to as the said amount) on which, in accordance with this Act, the tax is computed.

(2) Subject to subsections (3), (4) and (5), the provisions of this section shall have effect where capital gains tax has been charged by an assessment for the year in which the particular gains accrued and the tax has not been paid.

(3) In any case in which, on or after the date on which the capital gains tax has become payable, such proof is given to the Revenue Commissioners as renders them satisfied that particular gains cannot, by reason of legislation in the country in which they have accrued or of executive action of the government of that country, be remitted to the State, the Revenue Commissioners may, for the purposes of collection, treat the assessment as if the said amount did not include the particular gains, but such treatment shall terminate on the Revenue Commissioners ceasing to be satisfied as aforesaid.

(4) The Revenue Commissioners may, for the purposes of this section, call for such information as they consider necessary.

(5) Any person who is dissatisfied with a decision of the Revenue Commissioners under subsection (3) may, by giving notice in writing to the Revenue Commissioners within twenty-one days after the notification of the decision to him, apply to have the matter referred to the Appeal Commissioners, as if it were an appeal against an assessment, and the provisions of the Income Tax Act, 1967 , 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.

Consideration due after time of disposal.

44. —(1) If the consideration, or part of the consideration, taken into account in the computation of a chargeable gain is payable by instalments over a period beginning not earlier than the time when the disposal is made, being a period exceeding eighteen months then, if the person making the disposal satisfies the Revenue Commissioners that he would otherwise suffer undue hardship, the tax on a chargeable gain accruing on a disposal may, at his option, be paid by such instalments as the Revenue Commissioners may allow over a period not exceeding five years and ending not later than the time at which the last of the first-mentioned instalments is payable.

(2) In the computation of a chargeable gain, consideration for the disposal shall be brought into account without any discount for postponement of the right to receive any part of it and without regard to a risk of any part of the consideration being irrecoverable or to the right to receive any part of the consideration being contingent:

Provided that if any part of the consideration so brought into account is shown to the satisfaction of the inspector to be irrecoverable, such adjustment, whether by way of discharge or repayment of tax or otherwise, shall be made as the case may require.

Transfers of value derived from assets.

45. —(1) Without prejudice to the generality of the provisions of this Act as to the transactions which are disposals of assets, any transaction which under this section is to be treated as a disposal of an asset shall be so treated (with a corresponding acquisition of an interest in the asset) notwithstanding that there is no consideration and so far as, on the assumption that the parties to the transaction were at arm's length, the party making the disposal could have obtained consideration, or additional consideration, for the disposal, the transaction shall be treated as not being at arm's length and the consideration so obtainable, added to the consideration actually passing, shall be treated as the market value of what is acquired.

(2) (a) If a person having control of a company exercises his control so that value passes out of shares in the company owned by him or a person with whom he is connected, or out of rights over the company exercisable by him or by a person with whom he is connected, and passes into other shares in or rights over the company, that exercise of his control shall be a disposal of the shares or rights out of which the value passes by the person by whom they were owned or exercisable.

(b) References in paragraph (a) to a person include references to two or more persons connected with one another.

(3) If, after a transaction which results in the owner of land or of any other description of property becoming the lessee of the property there is any adjustment of the rights and liabilities under the lease (whether or not involving the grant of a new lease) which is as a whole favourable to the lessor, that shall be a disposal by the lessee of an interest in the property.

(4) If an asset is subject to any description of right or restriction, the extinction or abrogation, in whole or in part, of the right or restriction by the person entitled to enforce it shall be a disposal by him of the right or restriction.

Debts.

46. —(1) Where a person incurs a debt to another (that is, the original creditor), whether in Irish currency or in some other currency, no chargeable gain shall accrue to that creditor or his personal representative or legatee on a disposal of the debt:

Provided that this subsection shall not apply in the case of the debt on a security as defined in paragraph 3 of Schedule 2 (conversion of securities).

(2) Subject to the provisions of the said paragraph 3 and of paragraph 4 of Schedule 2 (company amalgamations), and subject to the foregoing subsection, the satisfaction of a debt or part of it (including a debt on a security as defined in the said paragraph 3) shall be treated as a disposal of the debt or of that part by the creditor made at the time when the debt or that part is satisfied.

(3) Where property is acquired by a creditor in satisfaction of his debt or part of it, then subject to the provisions of the said paragraph 3 and 4 the property shall not be treated as disposed of by the debtor or acquired by the creditor for a consideration greater than its market value at the time of the creditor's acquisition of it; but if under subsection (1) (and in a case not falling within either of the said paragraphs 3 or 4 no chargeable gain is to accrue on a disposal of the debt by the creditor (that is, the original creditor), and a chargeable gain accrues to him on a disposal by him of the property, the amount of the chargeable gain shall (where necessary) be reduced so as not to exceed the chargeable gain which would have accrued if he had acquired the property for a consideration equal to the amount of the debt or that part of it.

(4) A loss accruing on the disposal of a debt acquired by the person making the disposal from the original creditor or his personal representative or legatee at a time when the creditor or his personal representative or legatee is a person connected with the person making the disposal, and so acquired either directly or by one or more purchases through persons all of whom are connected with the person making the disposal, shall not be an allowable loss.

(5) Where the original creditor is a trustee and the debt, when created, is settled property, subsections (1) and (4) shall apply as if for the references to the original creditor's personal representative or legatee there were substituted references to any person becoming absolutely entitled, as against the trustee, to the debt on its ceasing to be settled property, and to that person's personal representative or legatee.

(6) This section shall not apply to a debt owed by a bank which is not in Irish currency or in sterling and which is represented by a sum standing to the credit of a person in an account in the bank unless it represents currency acquired by the holder for the personal expenditure outside the State of himself or his family or dependants (including expenditure on the maintenance of any residence outside the State).

Options.

47. —(1) Without prejudice to the provisions of section 8, the grant of an option, including—

(a) the grant of an option in the case where the grantor binds himself to sell an asset he does not own, and because the option is abandoned, never has occasion to own, and

(b) the grant of an option in a case where the grantor binds himself to buy an asset, which, because the option is abandoned, he does not acquire,

is the disposal of an asset (namely, of the option), but subject to the following provisions of this section as to treating the grant of an option as part of a larger transaction.

(2) If an option is exercised, the grant of the option and the transaction entered into by the grantor in fulfilment of his obligations under the option shall be treated as a single transaction and accordingly—

(a) if the option binds the grantor to sell, the consideration for the option is part of the consideration for the sale, and

(b) if the option binds the grantor to buy, the consideration for the option shall be deducted from the cost of acquisition incurred by the grantor in buying in pursuance of his obligations under the option.

(3) The exercise or abandonment of an option by the person for the time being entitled to exercise it shall not constitute the disposal of an asset by that person, but if an option is exercised, then the acquisition of the option (whether directly from the grantor or not) and the transaction entered into by the person exercising the option in exercise of his rights under the option shall be treated as a single transaction and accordingly—

(a) if the option binds the grantor to sell, the cost of acquiring the option shall be part of the cost of acquiring the asset which is sold, and

(b) if the option binds the grantor to buy, the cost of the option shall be treated as a cost incidental to the disposal of the asset which is bought by the grantor of the option.

(4) In relation to the disposal by way of transfer of an option binding the grantor to sell or buy shares or securities which have a quoted market value on a stock exchange in the State or elsewhere, the option shall be regarded as a wasting asset the life of which ends when the right to exercise the option ends, or when the option becomes valueless, whichever is the earlier, but without prejudice to the application of the provisions in Schedule 1 relating to wasting assets to other descriptions of options.

(5) Where an option which is an option to acquire assets exercisable by a person intending to use them, if acquired, for the purposes of a trade carried on by him or which he commences to carry on within two years of his acquisition of the option, is disposed of or abandoned, then—

(a) if the option is abandoned, the abandonment shall, notwithstanding subsection (3), constitute the disposal of an asset (namely, the option), and

(b) paragraph 9 of Schedule 1 (restriction of allowable expenditure for wasting asset) shall not apply.

(6) (a) Where an option to subscribe for shares in a company, being an option of a kind which, at the time of disposal or abandonment, is quoted, and, in the same manner as shares, dealt in on a stock exchange in the State or elsewhere, is disposed of or abandoned, then—

(i) if the option is abandoned, the abandonment shall, notwithstanding subsection (3) constitute the disposal of an asset (namely, of the option), and

(ii) paragraph 9 of Schedule 1 (restriction of allowable expenditure for wasting asset) and subsection (4) shall not apply.

(b) Where an option mentioned in paragraph (a) is dealt in within three months after the taking effect, with respect to the company granting the option, of any reorganisation, reduction, conversion or amalgamation to which paragraphs 2, 3, 4 or 5 of Schedule 2 applies (or within such longer period as the Revenue Commissioners may by notice in writing allow), the option shall, for the purposes of the said paragraphs 2, 3, 4 or 5, be regarded as the shares which could be acquired by exercising the option and section 49 (3) shall apply for determining its market value.

(7) In the case of an option relating to shares or securities, this section shall apply subject to the provisions of paragraph 13 of Schedule 1 and accordingly the option may be regarded in relation to the grantor or in relation to the person entitled to exercise the option, as relating to part of a holding of shares or securities as defined in the said paragraph 13.

(8) This section shall apply in relation to an option binding the grantor both to sell and to buy as if it were two separate options with half the consideration attributed to each.

(9) In this section references to an option include references to an option binding the grantor to grant a lease for a premium, or enter into any other transaction which is not a sale, and references to buying and selling in pursuance of an option shall be construed accordingly.

(10) This section shall apply in relation to a forfeited deposit of purchase money or other consideration money for a prospective purchase or other transaction which is abandoned as it applies in relation to the consideration for an option which binds the grantor to sell and which is not exercised.

Location of assets.

48. —The situation of any such assets as are specified in this section shall, except as otherwise provided by section 4, be determined in accordance with the following provisions:

(a) the situation of rights or interests (otherwise than by way of security) in or over immovable property is that of the immovable property,

(b) subject to the following provisions of this section, the situation of rights or interests (otherwise than by way of security) in or over tangible movable property is that of the tangible movable property,

(c) subject to the following provisions of this section, a debt, secured or unsecured, is situated in the State if and only if the creditor is resident in the State,

(d) shares or securities issued by any municipal or governmental authority, or by any body created by such an authority, are situated in the country of that authority,

(e) subject to paragraph (d), registered shares or securities are situated where they are registered and, if registered in more than one register, where the principal register is situated,

(f) a ship or aircraft is situated in the State if and only if the owner is resident in the State, and an interest or right in or over a ship or aircraft is situated in the State if and only if the person entitled to the interest or right is resident in the State,

(g) the situation of goodwill as a trade, business or professional asset is at the place where the trade, business or profession is carried on,

(h) patents, trade marks and designs are situated where they are registered, and if registered in more than one register, where each register is situated and copyright, franchises, rights and licences to use any copyright material, patent, trade mark or design are situated in the State if they, or any rights derived from them, are exercisable in the State, and

(i) a judgment debt is situated where the judgment is recorded.

Valuation.

49. —(1) Subject to the following subsections, in this Act “market value”, in relation to any assets, means the price which those assets might reasonably be expected to fetch on a sale in the open market.

(2) In estimating the market value of any assets no reduction shall be made in the estimate on account of the estimate being made on the assumption that the whole of the assets is to be placed on the market at one and the same time.

(3) The market value of shares or securities quoted on a stock exchange in the State or in the United Kingdom shall, except where in consequence of special circumstances the prices quoted are by themselves not a proper measure of market value, be as follows—

(a) in relation to shares or securities listed in the Stock Exchange Official List—Irish—

(i) the price shown in that list at which bargains in the shares or securities were last recorded (the previous price), or

(ii) where bargains, other than bargains done at special prices, were recorded in that list for the relevant date, the price at which the bargains were so recorded, or if more than one such price was so recorded, a price halfway between the highest and the lowest of such prices,

taking the amount under subparagraph (i) if less than under subparagraph (ii) or if no such business was recorded on the relevant date, and taking the amount under subparagraph (ii) if less than under subparagraph (i), and

(b) in relation to shares or securities listed in the Stock Exchange Daily Official List—

(i) the lower of the two prices shown in the quotations for the shares or securities on the relevant date plus one-quarter of the difference between those two figures, or

(ii) where bargains, other than bargains done at special prices were recorded in that list for the relevant date, the price at which the bargains were so recorded, or if more than one such price was so recorded, a price halfway between the highest and the lowest of such prices,

taking the amount under subparagraph (i) if less than under subparagraph (ii) or if no such bargains were recorded for the relevant date, and taking the amount under subparagraph (ii) if less than under subparagraph (i):

Provided that—

(a) where the shares or securities are listed in both of the said Official Lists for the relevant date, the lower of the two amounts as ascertained under paragraph (a) and paragraph (b) shall be taken;

(b) this subsection shall not apply to shares or securities for which some other stock exchange affords a more active market; and

(c) if the stock exchange concerned, or one of the stock exchanges concerned, is closed on the relevant date, the market value shall be ascertained by reference to the latest previous date or earliest subsequent date on which it is open, whichever affords the lower market value.

(4) Where shares and securities are not quoted on a stock exchange at the time at which their market value falls to be determined by virtue of subsection (1), it shall be assumed, for the purposes of such determination, that, in the open market which is postulated for the purposes of the said subsection (1), there is available to any prospective purchaser of the asset in question all the information which a prudent prospective purchaser of the asset might reasonably require if he were proposing to purchase it from a willing vendor by private treaty and at arm's length.

(5) In this Act “market value”, in relation to any rights of unit holders in any unit trust (including any unit trust legally established outside the State) the buying and selling prices of which are published regularly by the managers of the trust, shall mean an amount equal to the buying price (that is the lower price) so published on the relevant date, or if none were published on that date, on the latest date before.

(6) If and so far as any appeal against an assessment to capital gains tax or against a decision on a claim under this Act involves the question of the value of any shares or securities in a company resident in the State, other than shares or securities quoted on a stock exchange, that question shall be determined in like manner as an appeal against an assessment made on the company.

(7) In relation to an asset of a kind the sale of which is subject to restrictions imposed under the Exchange Control Act, 1954, such that part of what is paid by the purchaser is not retainable by the seller, the market value, as arrived at under this section, shall be subject to such adjustment as is appropriate having regard to the difference between the amount payable by a purchaser and the amount receivable by a seller.

Extension of certain Acts.

50. —(1) Section 1 of the Provisional Collection of Taxes Act, 1927 , is hereby amended by the insertion of “and capital gains tax” before “but no other tax or duty”.

(2) Section 39 of the Inland Revenue Regulation Act, 1890, is hereby amended by the insertion of “capital gains tax” before “stamp duties”.

Supplemental.

51. —(1) Schedule 1 (computation), Schedule 2 (companies and shareholders), Schedule 3 (leases), and Schedule 4 (administration) shall have effect for the purposes of this Act.

(2) So far as the provisions of this Act as modified by Part II of Schedule 1 require the computation of a gain by reference to events before the 6th day of April, 1974, all those provisions, including Part I of Schedule 1 and Schedules 2 and 3 and the provisions fixing the amount of the consideration deemed to be given on a disposal or an acquisition, shall apply except so far as expressly excluded.