Building a Business to Sell

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.

 

 Summary Table

Paddy the Irish Tax Resident IndividualIrish Tax Resident Holding Company
Once in a lifetime offer€10,000,000Holding Company Structure not used
Capital Gains Tax Rate33%Holding Company Structure not used
Capital Gains Tax Payable€3,300,000Holding Company Structure not used
After Tax Proceeds€6,700,000Holding 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

Option A

Seller is Irish Tax Resident Individual

Option B

Seller is Irish Tax Resident Holding Company

Once in a lifetime offer€10,000,000€10,000,000
Capital Gains Tax Rate33%33%
Capital Gains Tax Payable€3,300,000Nil
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.

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