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TAXES CONSOLIDATION ACT, 1997
Relief to certain companies liable to foreign tax.
830. —(1) In this section—
“accounting period” includes a part of an accounting period;
“external tax” means a tax chargeable and payable under the law of the territory in which the paying company is resident, being a territory to which this section applies, and which corresponds to Irish corporation tax or income tax or both of those taxes, but a tax payable under the law of a province, state or other part of a country, or which is levied by or on behalf of a municipality or other local body, shall for the purposes of this subsection be deemed not to correspond to those taxes.
(2) This section shall apply to every territory other than—
(a) Northern Ireland and Great Britain,
(b) the United States of America, and
(c) a territory with the Government of which arrangements are for the time being in force by virtue of section 826 .
(3) Where a company (in this section referred to as “the investing company”) has paid by deduction or otherwise, or is liable to pay, by reference to any part of its income arising in a territory to which this section applies, tax for any accounting period and it is shown to the satisfaction of the Revenue Commissioners that—
(a) that part of the investing company's income consists of a dividend or interest paid to it by a company resident in the territory (in this section referred to as “the paying company”) not less than 50 per cent of the voting power in which is controlled directly or indirectly by the investing company,
(b) that dividend or interest arose from the investment in the paying company by the investing company, whether by means of loan or otherwise, of a sum or sums representing—
(i) profits the Irish tax referable to which was reduced to nil under—
(I) Part III of the Finance (Miscellaneous Provisions) Act, 1956 ,
(II) Chapter IV of Part XXV of the Income Tax Act, 1967 , or
(III) Part IV of the Corporation Tax Act, 1976 ,
(ii) such proportion of profits the Irish tax referable to which was reduced otherwise than to nil under those provisions as is equal to the proportion by which that Irish tax has been so reduced, or
(iii) profits arising from exempted trading operations which by virtue of—
(I) Parts I and II of the Finance (Miscellaneous Provisions) Act, 1958 ,
(II) Chapter I of Part XXV of the Income Tax Act, 1967 , or
(III) Part V of the Corporation Tax Act, 1976 ,
were not, in relation to the company by which such operations were carried on, taken into account for any purpose of—
(A) the Income Tax Acts,
(B) Part V of the Finance Act, 1920, and the enactments amending or extending that Part, or
(C) the Corporation Tax Acts,
(c) the investing company has paid external tax in the territory in respect of that part of its income,
then, the Revenue Commissioners may grant to the investing company in respect of that accounting period such relief as is just with a view to affording relief in respect of the double taxation of that part of the investing company's income, but not exceeding the lesser of—
(aa) 50 per cent of the total of the corporation tax which but for this section would be payable by the investing company in respect of that part of its income, and
(bb) the amount of the external tax paid or payable in the territory in respect of that part of its income after deduction of any relief to which the company may be entitled in that territory.
(4) (a) External tax paid by the paying company in respect of its profits shall be taken into account in considering whether any, and if so what, relief ought to be allowed in respect of a dividend paid by the paying company to the investing company, and for the purposes of this section (other than this subsection) such tax or the appropriate part of such tax shall be regarded as external tax paid by the investing company.
(b) Paragraph 8 of Schedule 24 shall apply for the purpose of ascertaining the amount of the external tax paid by the paying company which is to be taken into account in relation to any dividend paid by the paying company to the investing company as it applies to the computation of foreign tax to be taken into account for the purposes of that paragraph.
(5) (a) Nothing in this section shall authorise the granting of relief under this section to any company in respect of any accounting period to such an extent as would reduce the aggregate amount (computed after deduction of any relief to which the company may be entitled in the territory) of the corporation tax and external tax payable by such company in respect of any part of its income of the kind described in subsection (3)(a) arising in a territory to which this section applies below the amount of corporation tax which would be payable by the company in respect of that part of its income if that part of its income had arisen in the State and had been liable in the hands of the investing company to corporation tax.
(b) In computing for the purposes of paragraph (a) the amount of corporation tax which would be so payable by the company in respect of that part of its income if that part had arisen in the State—
(i) no deduction for external tax shall be made from that part of its income, and
(ii) where pursuant to subsection (4) external tax paid by the paying company is regarded as external tax paid by the investing company, that part of the investing company's income shall be treated as increased by the amount of the external tax which is so regarded.
(6) Relief under this section shall be given as a credit against corporation tax chargeable by reference to the part of the investing company's income referred to in subsection (3)(a).
(7) (a) Any claim for relief under this section shall be made in writing to the inspector not later than 6 years from the end of the accounting period to which it relates.
(b) An appeal to the Appeal Commissioners shall lie on any question arising under this section in the like manner as an appeal would lie against an assessment to corporation tax, and the provisions of the Tax Acts relating to appeals shall apply accordingly.
Implementation of Council Directive No. 90/435/EEC concerning the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States.
831. —(1) (a) In this section—
“arrangements” means arrangements having the force of law by virtue of section 826 ;
“bilateral agreement” means any arrangements, protocol or other agreement between the Government and the government of another Member State;
“company” means a company of a Member State;
“company of a Member State” has the meaning assigned to it by Article 2 of the Directive;
“the Directive” means Council Directive No. 90/435/EEC of 23 July 19901 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States;
“distribution” means income from shares or from other rights, not being debt claims, to participate in a company's profits, and includes any amount assimilated to income from shares under the taxation laws of the State of which the company making the distribution is resident;
“foreign tax” means any tax which—
(i) is payable under the laws of a Member State other than the State, and
(ii) (I) is specified in paragraph (c) of Article 2 of the Directive, or
(II) is substituted for and is substantially similar to a tax so specified;
“Member State” means a Member State of the European Communities;
“parent company” means a company resident in the State which owns at least 25 per cent of the share capital of a company not so resident, but where a bilateral agreement contains a provision to the effect—
(i) that a company shall only be a parent company during any uninterrupted period of at least 2 years throughout which at least 25 per cent of the share capital of the company not resident in the State is owned by the first-mentioned company, or
(I) the requirement (being the requirement for the purposes of this definition) that a company resident in the State own at least 25 per cent of the share capital of the company not so resident shall be treated as a requirement that the company so resident holds at least 25 per cent of the voting rights in the company not so resident, or
(II) that requirement shall be so treated and a company shall only be a parent company during any uninterrupted period of at least 2 years throughout which at least 25 per cent of the voting rights in the company not resident in the State is held by the first-mentioned company,
then, in its application to a company to which the provision in the bilateral agreement applies, this definition shall apply subject to that provision and shall be construed accordingly.
(b) For the purposes of this section, a company shall be a subsidiary of another company which owns shares or holds voting rights in it where the other company's ownership of those shares or holding of those rights is sufficient for that other company to be a parent company.
(c) A word or expression used in this section and in the Directive has, unless the contrary intention appears, the same meaning in this section as in the Directive.
(2) Subject to subsections (3) and (4), where a parent company receives a distribution chargeable in the State to corporation tax, other than a distribution in a winding up, from its subsidiary—
(a) credit shall be allowed for—
(i) any withholding tax charged on the distribution by the Federal Republic of Germany, the Hellenic Republic or the Portuguese Republic, pursuant to the derogations provided for in Article 5 of the Directive, and
(ii) any foreign tax, not chargeable directly or by deduction in respect of the distribution, which is borne by the company making the distribution, and is properly attributable to the proportion of its profits which is represented by the distribution, in so far as that foreign tax exceeds so much of any tax credit in respect of the distribution as is payable to the parent company by the Member State in which the company making the distribution is resident,
against corporation tax in respect of the distribution to the extent that credit for such withholding tax and foreign tax would not otherwise be so allowed, and
(b) notwithstanding Chapter 2 of Part 4 , the distribution shall not be a dividend to which that Chapter applies.
(3) Where by virtue of subsection (2)(a) a company is to be allowed credit for tax payable under the laws of a Member State other than the State, Schedule 24 shall apply for the purposes of that subsection as if—
(a) the provisions of that subsection were arrangements providing that tax so payable shall be allowed as a credit against tax payable in the State, and
(b) references in Schedule 24 to a dividend were references to a distribution within the meaning of this section.
(4) Subsection (2) shall apply without prejudice to any provision of a bilateral agreement.
Provisions in relation to Convention for reciprocal avoidance of double taxation in the State and the United Kingdom of income and capital gains.
[FA77 s39(1) and (3) to (5); FA96 s132(2) and Sch5 PtII]
832. —(1) In this section—
“the Convention” means the Convention between the Government of Ireland and the Government of the United Kingdom for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, and the Protocol amending the Convention, both of which are set out in the Schedule to the Double Taxation Relief (Taxes on Income and Capital Gains) (United Kingdom) Order, 1976 (S.I. No. 319 of 1976);
“dividend” means a dividend within the meaning of Article 11(4) of the Convention.
(2) Subject to sections 70 and 71 as modified by section 73 , where a person is chargeable to income tax or corporation tax under Case III of Schedule D on income which is a dividend in respect of which the person is entitled to a tax credit under Article 11 (2)(b) of the Convention, the income so chargeable shall include the amount of the tax credit.
(3) For the purpose of giving effect to the Convention, the Tax Acts shall, for any year for which the Convention is in force, apply subject to the modifications in section 73 .
(4) (a) In applying section 707 in the case of a society registered under the enactments for the time being in force in the United Kingdom corresponding to the Friendly Societies Acts, 1896 to 1977, only expenses of management attributable to the life business referable to contracts of assurance made on or after the 6th day of April, 1976, shall be taken into account.
(b) In applying subsection (4) of section 726 in the case of a society referred to in paragraph (a), there shall be excluded from the liabilities of which B in that subsection is the average any liabilities to policy holders arising from contracts made before the 6th day of April, 1976.
(c) This subsection shall be construed as one with Part 26 .
Convention with United States of America.
[ITA67 s358(2) and (3).]
833. —(1) Schedule 24 shall apply for the purposes of giving effect to the Convention set out in Schedule 25 concluded on the 13th day of September, 1949, between the Government of Ireland and the Government of the United States of America.
(2) The Revenue Commissioners may from time to time make regulations in relation to the granting of the reliefs specified in the Convention and may in particular by those regulations provide—
(a) for securing that no such reliefs from taxation imposed by the laws of the United States of America as are provided for in the Convention shall enure to the benefit of persons not entitled to such reliefs, and
(b) for authorising, in cases where tax deductible from any periodical payment has, in order to comply with the terms of the Convention, not been deducted and it is discovered that the Convention does not apply to that payment, the recovery of the tax by assessment on the person entitled to the payment or by deduction from subsequent payments.
Relief in respect of ships documented under laws of United States of America.
834. —Exemption shall be granted from tax in respect of so much of the income of a citizen of the United States of America not resident in the State or of a corporation organised in the United States of America as is derived from the operation of a ship or ships documented under the laws of the United States of America.
Saver for arrangements made under section 362 of Income Tax Act, 1967.
835. —Notwithstanding the repeal of section 362 of the Income Tax Act, 1967 , by section 23 (1) of the Finance Act, 1987 , where before the 9th day of July, 1987, an order was made under section 362 of the Income Tax Act, 1967 , the arrangement to which the order relates shall continue to have the force of law.