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TAXES CONSOLIDATION ACT, 1997
Distributions and tax credits — general
Tax credit for certain recipients of distributions.
[CTA76 s88; FA94 s27(b); FA97 s37 and Sch2 Par1]
136. —(1) Where a company resident in the State makes a distribution, the recipient of the distribution shall, subject to the Tax Acts, be entitled to a tax credit under this section (in the Tax Acts referred to as a “tax credit”).
(2) The tax credit in respect of a distribution shall be available for the purposes specified in the Tax Acts and shall, subject to any express provision to the contrary, be an amount determined by the formula—
A is the standard credit rate per cent for the year of assessment in which the distribution is made, and
D is the amount or value of the distribution.
(3) A company resident in the State which is entitled to a tax credit in respect of a distribution may claim to have the amount of the tax credit paid to it if—
(a) the company is wholly exempt from corporation tax or is only not exempt in respect of trading income, or
(b) the distribution is one in relation to which express exemption (otherwise than by section 129 ) is given, whether specifically or by virtue of a more general exemption from tax, under any provision of the Tax Acts.
(4) A person, not being a company resident in the State, who is entitled to a tax credit in respect of a distribution may claim—
(a) to have the credit set against the income tax chargeable on such person's income for the year of assessment in which the distribution is made, and
(b) where the credit exceeds that income tax, and the person is—
(i) resident in the State, or
(ii) entitled under section 1033 to a tax credit in respect of the distribution,
to have the excess paid to such person.
(5) (a) In this subsection, “trust resident in the State” means a trust administered under the law of the State, not being a trust the general administration of which is ordinarily carried on outside the State and the trustees or a majority of the trustees of which are resident or ordinarily resident outside the State.
(b) Where a distribution mentioned in subsection (1) is, or is to be treated as, or is deemed to be under any provision of the Tax Acts, income of a person other than the recipient, that person shall be treated for the purposes of this section as receiving the distribution (and accordingly the question whether that person is entitled to a tax credit in respect of the distribution shall be determined by reference to where that person and not the actual recipient is resident), and where any such distribution is income of a trust resident in the State, the trustees shall be entitled to a tax credit in respect of such distribution if no other person is to be treated for the purposes of this section as receiving the distribution.
Disallowance of reliefs in respect of bonus issues.
137. —(1) This section shall apply where any person (in this section referred to as “the recipient”) receives an amount treated as a distribution by virtue of—
(a) paragraph (c) or (d) of section 130 (2),
(b) section 131 , or
(c) section 132 (2)(a),
and, in this section, a distribution within paragraph (a), (b) or (c) is referred to as a “bonus issue”, and “relevant tax credit”, in relation to a bonus issue, means the tax credit to which the recipient of the bonus issue becomes entitled under section 136 in respect of the bonus issue.
(2) Subject to subsection (5), where the recipient is entitled by reason of—
(a) any exemption from tax,
(b) the setting-off of losses against profits or income, or
(c) the payment of interest,
to recover tax in respect of any distribution which the recipient has received, no account shall be taken, for the purposes of any such exemption, set-off or payment of interest, of any bonus issue or relevant tax credit which the recipient has received.
(3) Subject to subsection (5), a bonus issue and the relevant tax credit shall be treated as not being franked investment income within the meaning of section 156 .
(4) Subject to subsection (5), the relevant tax credit relating to a bonus issue shall not be available to set against any income tax which the recipient is entitled to deduct under section 237 or with which the recipient is chargeable by virtue of section 238 .
(5) Nothing in subsections (2) to (4) shall affect the proportion (if any) of any bonus issue made in respect of any shares or securities which, if that bonus issue were declared as a dividend, would represent a normal return to the recipient on the consideration provided by the recipient for the relevant shares or securities, that is, those in respect of which the bonus issue was made and, if those securities are derived from shares or securities previously acquired by the recipient, the shares or securities which were previously acquired; and nothing in those subsections shall affect the like proportion of the relevant tax credit relating to that bonus issue.
(6) For the purposes of subsection (5)—
(a) if the consideration provided by the recipient for any of the relevant shares or securities was in excess of their market value at the time the recipient acquired them, or if no consideration was provided by the recipient for any of the relevant shares or securities, the recipient shall be taken to have provided for those shares or securities consideration equal to their market value at the time the recipient acquired them, and
(b) in determining whether an amount received by means of dividend exceeds a normal return, regard shall be had to the length of time before the receipt of that amount that the recipient first acquired any of the relevant shares or securities and to any dividends and other distributions made in respect of the relevant shares or securities during that time.
Treatment of dividends on certain preference shares.
[FA84 s42(1), (2) and (3); FA 89 s26]
138. —(1) In this section—
“preference shares” does not include preference shares—
(a) which are quoted on a stock exchange in the State,
(b) which are not so quoted but which carry rights in respect of dividends and capital comparable with those general for fixed-dividend shares quoted on a stock exchange in the State, or
(c) which are non-transferable shares issued on or after the 6th day of April, 1989, by a company in the course of carrying on relevant trading operations within the meaning of section 445 or 446 , to a company—
(i) none of the shares of which is beneficially owned, whether directly or indirectly, by a person resident in the State, and
(ii) which, if this paragraph had not been enacted, would not be chargeable to corporation tax in respect of any profits other than dividends which would be so chargeable by virtue of this section;
“shares” includes stock.
(2) This section shall apply to any dividend which—
(a) is paid by a company (in this section referred to as “the issuer”) to another company (in this section referred to as “the subscriber”) within the charge to corporation tax, and
(b) is so paid in respect of preference shares of the issuer.
(3) Notwithstanding any provision of the Tax Acts—
(a) the subscriber shall not be entitled to a tax credit in respect of a dividend to which this section applies, and
(b) the dividend shall be chargeable to corporation tax under Case IV of Schedule D.
Dividends and other distributions at gross rate or of gross amount.
CTA76 s178; FA78 s28(6); FA97 s37 and Sch2 par1]
139. —(1) Where any right or obligation created before the 6th day of April, 1976, is expressed by reference to a dividend at a gross rate or of a gross amount, that right or obligation shall, in relation to a dividend payable on or after that date, take effect as if the reference were to a dividend of an amount determined by the formula—
A is the standard credit rate per cent for the year of assessment in which the dividend is paid, and
D is an amount equal to a dividend at that gross rate or of that gross amount.
(2) Subsection (1) shall apply with the necessary modifications to a dividend partly at a gross rate or of a gross amount and shall apply to any distribution other than a dividend as it applies to a dividend.