Taxes Consolidation Act 1997 section 633B

Formation of SE or SCE by merger - not leaving assets in the State

Section 633B deals with the capital gains tax treatment where, on the formation of a Societas Europaea (SE) or a European Cooperative Society (SCE) by merger, an Irish resident company transfers the assets and liabilities of a non-Irish branch to a company resident in another EU Member State.

• The section applies where an SE or SCE is formed by merger, the merging companies are tax resident in EU Member States but not all in the same Member State, and an Irish resident company transfers all the assets and liabilities of a trade carried on through a branch in another Member State to a company resident in that other Member State, resulting in a net chargeable gain.
• Allowable losses arising on the transfer are set off against chargeable gains, and the transfer is treated as giving rise to a single chargeable gain equal to the net amount after deducting those losses.
• Section 634 applies to the single chargeable gain, providing credit against Irish tax for foreign tax that would have been payable on the transfer had relief under the EU Mergers Directive not been available in the other Member State.
• This mechanism prevents double taxation where the branch state grants tax-neutral treatment under the Directive at the time of the merger but subsequently taxes the assets on a later disposal.