Saturday, Dec 21, 2024

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Corporate Migration of Tax Residence within E.U.

Posted on: Thursday, March 22, 2012

Questions on CGT Groups can be very intricate.  The best way to approach them is to make reference to the relevant caselaw or legislation, outline the ruling or relevant section and state how it affects Irish companies under the appropriate tax heads.

On 29/11/2011 ECJ issued its judgement in the case of National Grid Indus BV v Inspecteur van de Belastingdienst Rijnmond C-371/10 (NGl)

This case is the first time that the ECJ specifically addressed the issue of exit taxes arising on the corporate migration of tax residence within the E.U.

An Exit Tax is imposed on latent gains arising on assets that an individual, company or permanent establishment transfers to another jurisdiction on migration of tax residence.

In order to migrate the tax residence of the company, the company must cease to be tax resident in Ireland.

No VAT or Stamp Duty issues arise from the mitigation of residence if no transfers take place.

Generally Corporation Tax arises in the form of an EXIT tax treating the assets as having been disposed of on migration – the CT liability arises in respect of chargeable gains.

If the Irish company is controlled by a foreign company (i.e. Lux Co.) then the above provision will not apply.

One implication of migration of residence is the cessation of a company being part of a CGT Group.