My question relates to a capital investment in a startup company (private LTD). This investment is essentially a gift as it will not buy the investor any shares in the company, nor does it convert to debt or need to be repaid. This capital will be used solely for R&D and product development. Does the company have any tax liability for this type of investment?
Capital investment and tax
- Thread starter fintanob
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Capital Acquisitions Tax Consolidation Act 2003, Section 43
The electronic Irish Statute Book (eISB) comprises the Acts of the Oireachtas (Parliament), Statutory Instruments, Legislation Directory, Constitution and a limited number of pre-1922 Acts.
www.irishstatutebook.ie
I believe the LTD is "looked through" when it receives a gift from an individual (assuming that is what is proposed here) and the beneficial owners are deemed to take the benefit in the same proportions as the market value of their beneficial interests in the company is increased by the benefit. See above link section 43(2)(b).
Short answer - shareholders pay gift tax.
Thank you for the reply that is very useful. Can I assume that we are talking about CAT and I can refer to the related pages on Revenue website for this?
From a tax point of view, you should probably set this up as a loan. You can, probably, gift the interest up to €3,000 back each year, without tax consequences, if you wish.