Thinking of selling your company or business?
If you are thinking about selling your company or business, it is important to carry out careful tax planning beforehand. It is essential that you are aware of the tax implications of selling a business in Ireland. In most circumstances, you will pay Capital Gains Tax (CGT) at a rate of 33% on the payment you receive for the sale of your company. This is the case if you are a shareholder in your company/the company is personally owned. However, if your shares are owned by a holding company the CGT does not apply.
What is a holding company?
A holding company is usually set up with the sole intention of controlling another company or companies. Holding companies may also own property, patents, trademarks, stocks, and other assets. Businesses or other companies that are completely owned by a holding company are called wholly-owned subsidiaries.
Where is the benefit?
The holding company comes under Capital gains tax exemptions. In the event an individual sells their company without using a holding company, they must pay tax of 10% on the first one million euro and 33% tax on the remainder. If the individual was using a holding company, the above taxes would not apply.
For example, if you sell your company for €20 million, you will pay CGT at 33%, which is €6.6 million. This leaves you with €13.4 million personally. Alternatively, you could leave the entire €20 million in the holding company.
The only disadvantage is that the money is now in the holding company. However, the shareholder can now control the timing of any tax payments. Also, they can use the money in the holding company to invest in other businesses in a tax-efficient manner.
This option is available to all shareholders. If you own any amount of shares in a company, you can avoid paying Capital gains tax by using a holding company to own your shares.
If you are thinking about selling your company or business, and need tax advice, you can contact us using the form below: