Public Private Partnership Contracts – Tax Appeals Commissioner's Recent Determination Provides Clarity for Foreign Shareholders
The Tax Appeals Commission recently determined that the public private partnership contract between a certain Irish company and the National Road Authority did not constitute an interest in Irish land. Accordingly, the shares disposed of by an EU company in the Irish company did not derive their value from Irish land and thus were not within the charge to Irish capital gains tax.


What was this tax dispute about?

The crux of this tax appeal [75TACD2021] concerned whether an EU company (ForeignCo) was within the charge to Irish capital gains tax (CGT) on the disposal of shares in an Irish company (IrishCo).  A non-Irish company is only within the charge to CGT on the sale of shares if the shares sold derive their value, or the greater part of their value, directly or indirectly from "land in the State".

ForeignCo, an EU incorporated and tax resident company, entered into a contract for the sale of shares in IrishCo, an Irish-resident company which designs, builds and operates toll booths on Irish motorways (Motorway) on behalf of the National Road Authority (NRA).  One of the completion deliverables included in the sale contract was that ForeignCo had to provide a CGT clearance certificate (Form CG50A) or a letter from Revenue confirming that a Form CG50A was not required concerning the sale of the shares. Prior to completion, Revenue contended that ForeignCo's proposed disposal of the IrishCo shares would be subject to CGT.  IrishCo's shares were sold and Revenue assessed ForeignCo to CGT on the chargeable gain. 

What were the main issues?

The Appeal Commissioner highlighted four key issues for consideration in determining the tax appeal:

  • The correct interpretation of the phrase 'land in the State' for the purposes of section 29(3)(a) of the Taxes Consolidation Act 1997 (TCA).
  • Did IrishCo have an interest in the land under and adjacent to the Motorway?
  • Did IrishCo's interest, if any, in the Motorway constitute 'land in the State' for the purposes of section 29(3)(a) TCA? and
  • Did IrishCo's shares derive their value from land in the State?

Summary of arguments 

Interpretation of 'Land in the State' 

Both parties had opposing views as to whether the ownership of a proprietary interest in land is necessary for the chargeability of non-residents pursuant to section 29(3)(a) TCA. Revenue submitted that such an interest was not required, while ForeignCo contended that an interest in land was a crucial requirement and without it, liability under section 29(3)(a) TCA could not arise.  

ForeignCo argued that 'land' within the meaning of section 5 TCA is equivalent to the common law meaning of land, contained within the Land and Conveyancing Law Reform Act 2009 (LCLRA) which includes both estates and lesser interests in land, such as easements or freehold covenants. ForeignCo asserted that the definition of land under the Interpretation Act 2005 (2005 Act) was not applicable for CGT purposes. 

Revenue disagreed and argued that the meaning of 'land' for CGT purposes was contained in the 2005 Act and included 'tenements, hereditaments, houses and buildings, land covered by water and any estate in or over land.' Revenue argued that this definition was not exhaustive and that IrishCo's interest in the Motorway by virtue of the public private partnership (PPP) contract would come within the scope of this definition.  

What type of interest, if any, does IrishCo have in the relevant land and could it constitute 'land in the State' for the purposes of section 29(3)(a)?

ForeignCo was of the view that IrishCo, by virtue of the PPP contract, had a 'limited, non-exclusive licence' to use the relevant land. ForeignCo submitted that the licence was personal in nature and did not provide IrishCo with an 'interest in the land', nor was it a licence coupled with an interest in the land. 

Revenue contended that the land access rights conferred upon IrishCo were not personal due to the right of assignment provided for in the PPP contract, and that access rights could be assigned separately. Revenue argued that the clauses in the contract established that IrishCo's interest in the land was greater than that of a licensee. 

Did the shares in IrishCo derive their value from land in the State?
ForeignCo submitted that the tolls paid by users of the Motorway were charged by the NRA and that IrishCo merely collected the tolls on the NRA's behalf. However, Revenue argued that IrishCo charged the tolls, and the value of IrishCo's shares derived from its turnover from land in the State. 


The Appeal Commissioner summarised his findings as follows:

  • 'Land' for the purposes of section 29(3)(a) means a freehold or leasehold estate in land or one of the lesser interests in land formerly recognised by common law and now codified in the LCLRA.
  • IrishCo has a limited and non-exclusive contractual licence to use the relevant Motorway land which will last for the duration of the PPP contract. 
  • The contractual licence was not 'land' within the meaning of section 5 of the TCA and therefore was not 'land in the State' for the purposes of section 29(3)(a).
  • The value of the IrishCo shares sold by ForeignCo derived the greater part of their value from IrishCo's rights under the PPP contract.
  • IrishCo's shares did not derive their value, or the greater part of their value, directly or indirectly from land in the State.


Revenue took a broad interpretation of what constituted land in the State and whether shares derived their value indirectly from Irish land.  In a considered determination running to 82 pages, the Appeal Commissioner found that Revenue's interpretation was "overly-broad" and was not prepared to stretch the meaning of these concepts. Whether acting for a foreign seller or a foreign purchaser of shares, this case highlights the importance of giving early consideration to whether shares derive their value, or the greater part of their value, directly or indirectly from Irish land. 

This is not the end of the matter as Revenue has sought to appeal the determination on a point of law to the High Court.  We will keep you apprised of developments.  


Contributed by Shane Dunleavy


Key Contacts

Brian Duffy Partner

Sonya Manzor Partner

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