Speaker 1

Hi, so just another quick Q&A video. Remember if you’ve got any questions do email them in and we’re happy to try and put some meat on the bones for everybody, because rather than me always asking a question for one person, it’s much better if we share the answers around to a group of people. This one is actually a tax question, and I’m not a tax advisor. This is always going to be heavily caveated in terms of the advice. But the question was simply if you’re doing a virtual merger or an agglomeration, does it trigger a capital gains event when that person takes shares as consideration for their companies? Effectively you’re buying the company using shares, is that considered a capital gain from a tax perspective?

Speaker 1

Now obviously every person has a different tax footprint around the world, and every jurisdiction has its own tax rules, but in most jurisdictions, you don’t crystallize a capital gain until the shares are sold. Doing a share swap is quite a normal way of completing a transaction. There’s not normally a capital gain until those shares are sold. Now obviously, take tax advice for your own individual jurisdiction. One notable exception to this is where people use trust structures. In a trust structure, effectively when you form your company, you’re depositing the shares into a trust, and because that has lots of kind of tax shelter type benefits, quite often there is a capital gains event if you then decide to move the ownership of those shares to somewhere else. Trust structures are very popular in Australia and in New Zealand.

Speaker 1

They’re less popular in Europe and the US, but if you see that the shareholder is a trust, it’s definitely worth getting specific tax advice around that, because yes, you might well find that there is a taxable event whenever those shares move anywhere, and it will either be treated as a capital gain or bizarrely, sometimes it’s treated as an inheritance tax issue even though nobody’s died. But they actually look, because this trust structure is a tax shelter, they actually look at levying a charge based on possible future taxation. Get proper tax advice, but in most normal situations, there isn’t a tax event by giving somebody a share. I hope you found that useful.