Taxes Consolidation Act 1997 section 626B

Exemption from tax in the case of gains on certain disposals of shares

Section 626B provides for an exemption from capital gains tax on the disposal by a parent company of shares in a subsidiary, commonly known as the participation exemption.

• A gain on the disposal of shares in a subsidiary is exempt where the parent has held at least 5% of the subsidiary's share capital, distributable profits and winding-up assets for a continuous 12-month period, the subsidiary is resident in a relevant territory and a trading condition is met.
• The exemption does not apply to disposals of shares held as part of a life business fund, shares deriving their value from Irish land, minerals or mineral rights, deemed disposals on a company ceasing Irish residence, or disposals already treated as giving rise to no gain or no loss.
• The exemption does not apply where chargeable gains are attributed to a participator under the anti-avoidance provisions of section 590, unless the participator is a company.
• Money or other assets transferred to a subsidiary before its disposal to ensure the value of its shares does not derive wholly or mainly from land or minerals is ignored in determining the value of the shares, where the main purpose of the transfer is tax avoidance.