Irish Revenue updates section 980 guidance following the Cintra decision

Background: Section 980 of the Taxes Consolidation Act 1997 ("TCA")

Section 980 TCA imposes a withholding obligation on purchasers acquiring certain specified assets. Unless the vendor produces a Form CG50A clearance certificate (“CG50A”) (or, in the case of certain new houses, one of the certificates listed in section 980(8A) TCA), the purchaser must deduct 15% from the consideration and remit that amount to Irish Revenue. The section applies where the consideration exceeds €500,000, or €1,000,000 where the asset disposed of is a house.

Importantly, the section does not apply to a disposal by way of gift, or where a disposal is partly by way of gift and the consideration does not exceed €500,000.

The specified assets to which section 980 TCA applies are:

(a) Irish land and buildings;

(b) Irish minerals and mining rights;

(c) exploration or exploitation rights on the Continental Shelf;

(d) unquoted shares deriving their value or the greater part of their value directly or indirectly from assets described in (a) to (c);

(e) shares received in exchange for shares at (d); and

(f) goodwill of a trade carried on in Ireland.

Where a purchaser retains the 15%, they must deliver an account of the amount retained to Irish Revenue and pay that amount to the Collector General within 30 days. In the case of non-monetary consideration, where no CG50A has been provided, the purchaser must notify Irish Revenue in writing of the particulars of the asset transfer, and pay 15% of the market value of the consideration to the Collector General, within seven days of acquisition.

The Cintra Decision and the definition of "land"

The Cintra case arose from a Tax Appeals Commission determination (75TACD2021) and came before the Irish High Court. The central question was the meaning of "land in the State" for the purposes of sections 5 and 29(3)(a) TCA.

By way of background, Cintra Infraestructureas Internacional SLU was a non-resident company which disposed of shares in an Irish company whose value was said to derive from Irish land (in connection with an infrastructure concession). The Appeal Commissioner had held that the Irish company did not have an estate or proprietorial interest in the relevant land and therefore the shares did not derive their value from "land in the State" within the meaning of section 29(3)(a) TCA. Irish Revenue appealed to the High Court.

In her judgment, Ms. Justice Butler held that "land" for CGT purposes means a freehold or leasehold estate in land, or one of the lesser interests in land specified in section 11(4) of the Land and Conveyancing Law Reform Act 2009 (the “2009 Act”). The court confirmed that a proprietary interest in land is necessary for non-residents to be charged to tax under section 29(3) TCA. This is significant because it roots the definition of "land" in established property law concepts rather than a broader economic or commercial interpretation.

Update to the TDM

The TDM now expressly adopts this interpretation, inserting a new section headed "Meaning of 'land' for purposes of section 980" which states that, for the purposes of section 980 TCA, "land" is as defined in section 5 TCA, and as confirmed in Cintra, means a freehold or leasehold estate in land or one of the lesser interests in land specified in section 11(4) of the 2009 Act. The express incorporation of the Cintra definition into the TDM is a welcome development, providing practitioners with a clear, judicially endorsed framework for determining what constitutes "land" for section 980 TCA  purposes.

Practical impact on transactions

(a) Share disposals (section 980(2)(a)(iv) TCA)

As mentioned above, section 980 TCA applies to unquoted shares deriving the greater part of their value from Irish land and buildings. The adoption of the narrower, proprietary interest definition of "land" in the Cintra case (and now reflected by Irish Revenue in the TDM), limited to freehold or leasehold estates and lesser interests under section 11(4) of the 2009 Act, means the withholding obligation under section 980 TCA now turns on whether the underlying company holds recognised proprietary interests in Irish land representing the greater part of the share value, rather than on any broader economic concept. This should provide greater certainty for share sales in Irish companies which may hold assets which fall below this threshold.

(b) Loans secured on land

Irish Revenue's existing view, unchanged by this update, is that loans secured on Irish land are generally "interests in land" for section 980 TCA purposes and are regarded as securities for the purposes of this section. Parties should continue to apply the existing guidance in relation to financial institution and Irish securitisation (section 110) companies’ disposals of such loans.

(c) CG50A applications and due diligence

Purchasers should continue to require CG50As (or apply the 15% withholding) on any acquisition of specified assets where the consideration exceeds the relevant threshold. The updated definition may also assist parties in determining whether a CG50A is required in borderline cases involving infrastructure or concession type assets.

Conclusion

The updated TDM is a welcome development, anchoring the section 980 TCA withholding regime to established property law concepts in line with the High Court's reasoning in Cintra. This should provide greater certainty for practitioners, particularly when advising on share disposals in Irish companies and on transactions involving infrastructure, public-private partnership, or concession-type assets where rights over land may fall short of a recognised proprietary interest. In the renewable energy space, the updated guidance may also be of relevance for the sale of early stage developments, such as where the shares being sold are in a company which derives most of its value from options for leases which typically do not meet the criteria to constitute "land" as outlined in the Cintra case.

Practitioners should, however, remain mindful that Irish Revenue's position on loans secured on Irish land is unchanged and that the obligation to obtain CG50A clearance (or apply the 15% withholding) continues to apply where the relevant consideration threshold is met. The position may also evolve if the Cintra reasoning is revisited in later proceedings or through legislative amendment.