Structure A – Common Business Structure
Structure A – SALE offer
A business owner receives an offer of €10,000,000 for his Irish Trading Company A. The business owner is an Irish Tax Resident Individual. He receives €10,000,000 in respect of his shares in Irish Trading Company A. On the assumption that the business was built from scratch by the seller, we ignore any base cost or acquisition costs. The Irish Tax Resident Individual is liable to Irish Capital Gains Tax at 33% on the taxable gain.
|Paddy the Irish Tax Resident Individual||Irish Tax Resident Holding Company|
|Once in a lifetime offer||€10,000,000||Holding Company Structure not used|
|Capital Gains Tax Rate||33%||Holding Company Structure not used|
|Capital Gains Tax Payable||€3,300,000||Holding Company Structure not used|
|After Tax Proceeds||€6,700,000||Holding Company Structure not used|
Structure B – Recommended Business Structure
Structure B – SALE Offer
Let’s say a once in a lifetime offer of €10,000,000 is achieved for Irish Trading Company A. Irish Tax Resident Holding Company receives €10,000,000 in respect of the shares it holds in Irish Tax Resident Trading Company A.
Provided a small number of conditions are met, Irish Tax Resident Holding Company avails of the Participation Exemption available under S626B Taxes Consolidation Act 1997, to exempt the sale from capital gains tax.
Structure B – Summary Table
Seller is Irish Tax Resident Individual
Seller is Irish Tax Resident Holding Company
|Once in a lifetime offer||€10,000,000||€10,000,000|
|Capital Gains Tax Rate||33%||33%|
|Capital Gains Tax Payable||€3,300,000||Nil|
|After Tax Proceeds||€6,700,000||€10,000,000|
Comparing Results of Structure A and Structure B
In comparing both options, we see that Structure B, results in a hugh tax saving of €3,300,000.