Finance (No.2) Act 2013 Update

Tax in Troubled Times

Two measures introduced in the Finance (No.2) Act 2013 are of particular relevance to those involved in debt restructuring and distressed businesses. The first measure relates to debt write-offs and chargeable gains. The second relates to VAT recovery.

(a) Debt write-offs

Irish corporates and individuals borrowed significant sums to acquire capital assets (typically investment properties and Irish trading companies) in the period prior to the financial crisis which commenced in 2008. For capital gains tax ("CGT") purposes, the base cost of that asset was calculated based on the amount which the debtor had originally paid on acquisition, regardless of whether that was funded through borrowed money or not. Where the asset has suffered from price deflation, a subsequent sale of the asset would generally result in a potentially valuable capital loss.