Q1. What exactly did the Inland Revenue Department clarify in its recent notice?
The Inland Revenue Department ("IRD"), through its recent notice dated 27th January, 2026 ("IRD Notice"), clarified how preference shares are to be treated when determining whether a company has undergone a "change in ownership" under Section 57 of the Income Tax Act, 2058 ("Tax Act").
As per the IRD Notice, preference shares will not be included in calculating the 50% ownership change threshold under Section 57 unless those preference shares carry voting rights.
In other words, the IRD has drawn a distinction between:
- Economic participation in a company; and
- Voting control over a company.
If preference shares do not carry voting rights (or only carry limited class-based voting rights), their issuance or transfer does not count toward the 50% change in ownership test. However, if the preference shares carry voting rights that affect corporate control, they may be included in determining
