A general tax ruling on exchange of shares

8 July 2021

The Minister of Finance issued on 7 May 2021 a general tax ruling on the application of income tax laws governing exchange of shares.

Conditions of tax neutrality

The ruling concerns the regulations of PIT and CIT Acts which stipulate that the exchange of shares is tax-neutral if certain conditions are met.

The issue which raised doubts was whether after the amendment of laws in 2015 the conditions of tax neutrality will be fulfilled if the purchasing company obtains shares from more than one shareholder and none of them holds the majority of the shares.

So far tax authorities have refused to abolish the tax implications of the exchange of shares as the word “shareholders” was replaced with “shareholder” in the regulations.

Opinion of the Ministry of Finance

In his general tax ruling the Minister cleared the doubts and confirmed the prevailing case law concerning the tax neutrality of the exchange of shares between a company and more than one shareholder in separate transactions carried out in a specified time.