Business
Section 626B: tax-free sales of shares in subsidiaries
Last updated 16 October 2026
An Irish company pays no tax on selling shares in a trading subsidiary in the EU or a treaty country. It must have held 5% or more for 12 months.
Companies normally pay tax on gains when they sell assets, including shares. Section 626B of the Taxes Consolidation Act exempts the gain when a company sells shares in a subsidiary that meets three tests. It is sometimes called the participation exemption for gains. Revenue's guidance is Tax and Duty Manual 20-01-14.
The three tests
- Holding: the selling company held at least 5% of the company it sells shares in, for a continuous 12 months. The sale must happen while it still qualifies, or within two years of when it last did.
- Residence: the company sold is resident in an EU country, or a country with a tax treaty with Ireland. A treaty signed but not yet in force counts.
- Trading: at the time of sale, the company sold, or the group taken together, carries on wholly or mainly a trade. Here ‘mainly’ means more than 50%, judged mostly by trading profits and trading assets.
When it doesn't apply
- Shares that get most of their value from land or minerals in Ireland.
- Transfers within a group that are already treated as giving no gain and no loss.
- Shares held in a life assurance company's life business fund.
- Arrangements caught by anti-avoidance rules.
Revenue accepts that a company that traded up to its liquidation can still meet the trading test. The company must apply with full details.
Examples
| Sale | Result |
|---|---|
| An Irish company sells its 30% stake, held for four years, in a trading company resident in Germany | Exempt: holding, residence and trading tests met |
| The same sale, but the stake was 4% | Taxable: below the 5% holding |
| A 40% stake, sold 18 months after it was cut to 2% | Exempt: sold within two years of last being a parent |
| A 100% stake in a company whose value comes mainly from Irish land | Taxable: shares deriving value from land in the State are excluded |
| A 60% stake in a company that mostly holds investments, in a group that doesn't trade | Taxable: the trading test isn't met |
Why it matters
It lets Irish holding companies restructure and sell trading businesses without a tax charge on the gain. Dividends from the same subsidiaries may also be exempt under the participation exemption for foreign dividends.
For the company's tax on its income, use the corporation tax calculator.
Work it out
Sources
- Revenue: Corporation Tax: basis of charge (12.5% trading, 25% non-trading and excepted trades) (checked 25/10/2026)
- Revenue: How to calculate CGT (checked 25/10/2026)
General information, not tax advice. HeyPenny is not a tax agent.