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39 1997

TAXES CONSOLIDATION ACT, 1997

PART 21

Mergers, Divisions, Transfers of Assets and Exchanges of Shares Concerning Companies of Different Member States

Interpretation ( Part 21 ).

[FA92 s64]

630. —In this Part—

bilateral agreement” means arrangements having the force of law by virtue of section 826 ;

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 19901 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 Communities;

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 631 (1) or 634 (2), 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.

[FA92 s65]

631. —(1) (a) This section shall apply where 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 307 or 308 .

(b) There shall be made to or on the receiving company in accordance with sections 307 and 308 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 been made to or on the transferring company 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 Acts are to apply subject to subsections (6) to (9) of section 400 .

(3) For the purposes of the Capital Gains Tax Acts and, in so far as they apply to chargeable gains, the Corporation Tax Acts—

(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 the receiving company.

(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 they apply to chargeable gains, 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 subsection (3)(a) 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 section 552 (1)(a) 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) to (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 is 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 is to be made by the transferring company under section 951 for the accounting period in which the transfer takes place.

Transfer of assets by company to its parent company.

[FA92 s66]

632. —(1) Where a company disposes of an asset used for the purposes of a trade carried on by it in the State to another company which holds all of the securities representing the company's capital and but for this section the companies would not be treated in accordance with section 617 in respect of the 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 631 applies,

sections 617 to 619 shall apply as if the companies were resident in the State.

(2) Subsection (5) of section 631 shall apply with any necessary modification for the purposes of this section as if references in that subsection to subsections (2) to (4) of that section were references to subsection (1) of this section.

Company reconstruction or amalgamation: transfer of development land.

[FA92 s67]

633. —Where a company, for the purposes of or in connection with a scheme of reconstruction or amalgamation (within the meaning of section 615 ), disposes of an asset which consists of development land (within the meaning of section 648 ) to another company and—

(a) the disposal is not made in the course of a transfer to which section 631 applies, and

(b) the company disposing of the asset and the company acquiring the asset would, if—

(i) the definition of “chargeable gains” in section 78 (4), and

(ii) section 649(1),

were deleted, be treated in accordance with section 615 (2) in respect of that asset,

then, the companies shall be treated for the purposes of the Capital Gains Tax Acts as if the 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 556 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 the asset.

Credit for tax.

[FA92 s69]

634. —(1) In 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,

(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 the receiving company's acquisition of the assets, 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 those gains accruing would have been so chargeable, the amount of tax which would have been payable under that law if, in 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 that law other than the provisions mentioned in paragraph (a) had been claimed.

(2) Where—

(a) a company 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 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 Chapter 1 of Part 35 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.

Avoidance of tax.

[FA92 s70]

635. —Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, sections 631 to 634 shall not apply as respects a transfer or disposal unless it is shown that the transfer or disposal, as the case may be, 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.

[FA92 s71]

636. —(1) In this section, “appropriate inspector” has the same meaning as in section 950 .

(2) Where section 631 , 632 , 633 or 634 applies in relation to a transfer or disposal, the transferring company shall make a return of the transfer or disposal, as the case may be, to the appropriate inspector in such form as the Revenue Commissioners may require.

(3) Where corporation tax or capital gains tax payable by a company is to be reduced by virtue of section 634 , 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.

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

Other transactions.

[FA92 s72]

637. —(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 Part does not apply,

give such relief as appears to them to be just and reasonable for the purposes of giving effect to the Directive.

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

Apportionment of amounts.

[FA92 s74]

638. —Where for the purposes of this Part any sum is 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 2 or more companies, 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 the 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 to the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications, and all those companies shall be entitled to appear and be heard by the Appeal Commissioners or to make representations to them in writing.

1O.J. No. L225, 20.8.1990, p. 1.