Ireland Clarifies Vodafone Shareholder Tax Relief

by Jason Gorringe, Tax-News.com, London

31 December 2014

The Irish Revenue has issued additional guidance on a change introduced in the Finance Act 2014 to provide relief for Vodafone shareholders.

In January 2014, Revenue confirmed that there would be no chargeable gain on the proposed sale of Vodafone's US group – the principal asset of which was its 45 percent stake in Verizon Wireless – to Verizon Communications. As part of the sale, Vodafone carried out a return of value to shareholders, partly in cash and partly in Verizon Consideration shares.

The additional guidance issued by Revenue relates to a relieving measure introduced by Section 48 of the Finance Act 2014. The measure will benefit small shareholders who inadvertently found themselves subject to an unintended liability to income tax, pay-related-social-insurance (PRSI), and the Universal Social Charge (USC), rather than a nil capital gains tax (CGT) liability.

Section 48 provides that individuals who received a return of value payment of EUR1,000 (USD1,218) or less, arising from the receipt of "C Shares," will be treated as having received a capital sum subject to capital gains tax rules, rather than an income sum subject to income tax, PRSI, and USC, unless they opt to have the payment treated as income.

As the guidance explains, individuals who acquired shares in Vodafone as a consequence of an original investment in Eircom shares in 1999, and who received a return of value of EUR1,000 or less, will not have to pay income tax, PRSI, USC, or capital gains tax on the return of value.

The guidance also notes that Vodafone shareholders who made a capital loss on the return of value of EUR1,000 or less, and who had no other chargeable gains on other disposals in 2014, do not need to submit a tax return in respect of the Vodafone return of value if they are not otherwise required to submit a tax return. Those affected should instead keep a record of the loss accrued, which can be offset against any gains that might arise in future years. Taxpayers who are required to submit a tax return can include details of the amount of the return of value and the amount of loss available for offset.

Ireland's annual CGT exempt amount stands at EUR1,270.

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