Global Daily Tax News, Ireland Updates Guidance On Associated Companies Stamp Duty Exemption, (Jun 21, 2024)

The Irish Revenue has updated its guidance on "associated companies" relief, provided for in Section 79 of the Stamp Duties Consolidation Act 1999.

The provision provides for a stamp duty exemption for certain instruments that have the effect of conveying or transferring a beneficial interest in property between associated bodies corporate.

The Section 79: Associated companies relief Tax and Duty Manual has been updated in Section 5.3.1 "Alternative conditions" to clarify that the treatment referred to in paragraph (g) does not apply where any of the conditions set out in paragraphs (c) to (f) apply in relation to the property.

This section concerns Subsection 7A, inserted by Finance Act 2017. This provides that where a transferor is either:

• liquidated, or

• dissolved without going into liquidation and a conveyance or transfer has been effected as a result of a merger by absorption (within the meaning of section 463 or 1129 of the Companies Act 2014) by reason of which the foregoing dissolution of the transferor has taken place

the association between the transferor and the transferee will be deemed to be unbroken provided that, for two years from the date of the conveyance or transfer, the following two conditions are met:

• the beneficial interest that was conveyed or transferred continues to be held by the transferee (subsection (7A)(b)(i)); and

• the beneficial ownership of the ordinary share capital of the transferee remains unchanged (subsection (7A)(b)(ii)).

Section 5.3.1 acknowledges that "practical difficulties may be experienced in satisfying the two conditions in subsection (7A) for the 2-year period following the date of conveyance or transfer." It provides, accordingly, where the two conditions are not satisfied for the required two-year period, Revenue will not seek a clawback of the exemption provided alternative conditions are met. These are listed in Section 5.3.1 of the guidance under points (a) through (g).

Alternative condition "(g)" newly provides that Revenue will not seek to clawback the exemption if:

"(g) the transferred property comprises shares in a company that is liquidated or dissolved within the two-year period following the transfer, resulting in the extinguishment of those shares. However, where the value of the shares was attributable to property held by the company at the time of transfer, that property must continue to be retained within the corporate group (unless one of the conditions set out in (c) to (f) above applies in relation to the property)."

Alternative condition "(c)" is as follows:

"(c) the transferred property comprises book debts which are paid off within the two-year period following the transfer;"

While alternative condition "(f)" is as follows:

"(f) in the case of a merger of a trade, the transferred property comprises trading assets such as stock and plant and equipment which are naturally utilised during the course of the trade within the two-year period following the transfer;"