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5 2005

Finance Act 2005

Chapter 2

Income Tax

Amendment of section 15 (rate of charge) of Principal Act.

2. —As respects the year of assessment 2005 and subsequent years of assessment, section 15 of the Principal Act is amended—

(a) by substituting “€20,400” for “€19,000” (inserted by the Finance Act 2002 ) in subsection (3), and

(b) by substituting the following Table for the Table (as so inserted) to that section:

“TABLE

PART 1

 

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first €29,400

20 per cent

the standard rate

The remainder

42 per cent

the higher rate

 

PART 2

 

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first €33,400

20 per cent

the standard rate

The remainder

42 per cent

the higher rate

 

PART 3

 

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first €38,400

20 per cent

the standard rate

The remainder

42 per cent

he higher rate

”.

Personal tax credits.

3. —(1) Where an individual is entitled under a provision of the Principal Act mentioned in column (1) of the Table to this subsection to have the income tax to be charged on the individual, other than in accordance with the provisions of section 16(2) of the Principal Act, reduced for the year of assessment 2005 or any subsequent year of assessment and the amount of the reduction would, but for this section, be an amount which is the lesser of—

(a) the amount specified in column (2) of that Table, and

(b) the amount which reduces that liability to nil,

the amount of the reduction in accordance with paragraph (a) shall be the amount of the tax credit specified in column (3) of the Table.

TABLE

Statutory Provision

Existing tax credit (full year)

Tax credit for the year 2005 and subsequent years

(1)

(2)

(3)

Section 461

(basic personal tax credit)

(married person)

€3,040

€3,160

(widowed person bereaved in year of assessment)

€3,040

€3,160

(single person)

€1,520

€1,580

Section 461A

(additional tax credit for certain widowed persons)

€300

€400

Section 462

(one-parent family tax credit)

€1,520

€1,580

Section 463

(widowed parent tax credit)

(1st year)

€2,600

€2,800

(2nd year)

€2,100

€2,300

(3rd year)

€1,600

€1,800

(4th year)

€1,100

€1,300

(5th year)

€600

€800

Section 465

(incapacitated child tax credit)

€500

€1,000

Section 468

(blind person's tax credit)

(blind person)

€800

€1,000

(both spouses blind)

€1,600

€2,000

Section 472

(employee tax credit)

€1,040

€1,270

(2) Section 3 (as amended by the Finance Act 2004 ) of the Finance Act 2002 shall have effect subject to the provisions of this section.

(3) Schedule (1) shall apply for the purposes of supplementing subsection (1).

Age exemption.

4. —As respects the year of assessment 2005 and subsequent years of assessment, section 188 of the Principal Act is amended, in subsection (2), by substituting “€33,000” for “€31,000” (inserted by the Finance Act 2004 ) and “€16,500” for “€15,500” (as so inserted).

Amendment of section 126 (tax treatment of certain benefits payable under Social Welfare Acts) of Principal Act.

5. —Section 126 of the Principal Act is amended by substituting the following for paragraph (b) (inserted by the Finance Act 2003 ) of subsection (8):

“(b) Notwithstanding subsection (3) and the Finance Act 1992 (Commencement of Section 15) (Unemployment Benefit and Pay-Related Benefit) Order 1994 (S.I. No. 19 of 1994), subsection (3)(b) shall not apply in relation to unemployment benefit paid or payable, in the period commencing on 6 April 1997 and ending on 31 December 2006, to a person employed in short-time employment.”.

Amendment of section 473 (allowance for rent paid by certain tenants) of Principal Act.

6. —Section 473 of the Principal Act is amended as respects the year of assessment 2005 and subsequent years of assessment, by the substitution in subsection (1) of the following definition for the definition of “specified limit” (inserted by the Finance Act 2001 ):

“ ‘specified limit’, in relation to an individual for a year of assessment, means—

(a) in the case of—

(i) a married person assessed to tax in accordance with section 1017, or

(ii) a widowed person,

€3,000; but, if at any time during the year of assessment the individual was of the age of 55 years or over, ‘specified limit’ means €6,000, and

(b) in any other case, €1,500; but, if at any time during the year of assessment the individual was of the age of 55 years or over, ‘specified limit’ means €3,000;”.

Amendment of section 116 (interpretation (Chapter 3)) of Principal Act.

7. —Section 116 of the Principal Act is amended by inserting the following after the definition of “employment” in subsection (1):

“ ‘premises’ includes lands;”.

Amendment of section 118 (benefits in kind: general charging provision) of Principal Act.

8. —Section 118 of the Principal Act is amended by substituting the following for subsection (5A):

“(5A) (a) Subsection (1) shall not apply to expense incurred by the body corporate in or in connection with the provision for a director or employee of a monthly or annual bus, railway or ferry travel pass issued by or on behalf of one or more approved transport providers.

(b) In this subsection—

‘approved transport provider’ means—

(a) Córas Iompair Éireann or any of its subsidiaries,

(b) a holder of a passenger licence granted under section 7 of the Road Transport Act 1932 ,

(c) a person who provides a passenger transport service under an arrangement entered into with Córas Iompair Éireann in accordance with section 13(1) of the Transport Act 1950 ,

(d) the Railway Procurement Agency or any of its subsidiaries,

(e) a person who has entered into an arrangement with the Railway Procurement Agency, in accordance with section 43(6) of the Transport (Railway Infrastructure) Act 2001 to operate a railway, or

(f) a person who provides a ferry service within the State, operating a vessel which holds a current valid—

(i) passenger ship safety certificate,

(ii) passenger boat licence, or

(iii) high-speed craft safety certificate,

issued by the Minister for Communications, Marine and Natural Resources;

‘railway pass’ includes a pass issued by a railway designated as a light railway or as a metro in a railway order made under section 43 of the Transport (Railway Infrastructure) Act 2001 .”.

Preferential loans.

9. —Section 122 of the Principal Act is amended—

(a) in subsection (1)—

(i) by substituting the following for the definition of “employee”:

“ ‘employee’, in relation to an employer, means an individual employed by the employer in an employment—

(a) to which Chapter 3 of this Part applies, or

(b) the profits or gains of which are chargeable to tax under Case III of Schedule D,

including, in a case where the employer is a body corporate, a director (within the meaning of that Chapter) of the body corporate;”,

and

(ii) in the definition of “preferential loan” by substituting “means, in relation to an individual, a loan, in respect of which no interest is payable or interest is payable at a preferential rate, made directly or indirectly to the individual” for “means a loan, in respect of which no interest is payable or interest is payable at a preferential rate, made directly or indirectly to an individual”,

and

(b) by substituting the following for subsection (2):

“(2) Where, for the whole or part of a year of assessment, there is outstanding, in relation to an individual, a preferential loan, the individual shall, subject to subsection (4), be treated for the purposes of section 112 or a charge to tax under Case III of Schedule D, as having received in that year of assessment, as a perquisite of the office or employment with the employer who made the loan, a sum equal to—

(a) if no interest is payable on the preferential loan or loans, the amount of interest which would have been payable in that year, if interest had been payable on the loan or loans at the specified rate, or

(b) if interest is paid or payable at a preferential rate or rates, the difference between the aggregate amount of interest paid or payable in that year and the amount of interest which would have been payable in that year, if interest had been payable on the loan or loans at the specified rate,

and the individual or, in the case of an individual who is a wife whose husband is chargeable to tax for the year of assessment in accordance with the provisions of section 1017, the spouse of the individual, shall be charged to tax accordingly.”.

Costs and expenses in respect of personal security assets and services.

10. —The Principal Act is amended by inserting the following after section 118:

“118A.—(1) In this section—

‘asset’ includes equipment or a structure, but not any mode of transport or a dwelling or grounds appurtenant to a dwelling;

‘service’ does not include a dwelling or grounds appurtenant to a dwelling.

(2) This section applies where there is a credible and serious threat to a director's or an employee's personal physical security, which arises wholly or mainly because of the director's or employee's office or employment.

(3) This section applies to expense incurred by the body corporate, or incurred by a director or employee and reimbursed to the director or employee by the body corporate—

(a) in—

(i) the provision or use of, or

(ii) expenses connected with,

an asset or service for the improvement of personal security which is provided for or used by the director or employee to meet the threat to his or her personal physical security, and

(b) with the sole object of meeting that threat.

(4) Subject to subsections (6) and (7), where this section applies, section 118(1) shall not apply to an expense to which this section applies.

(5) Where the body corporate intends the asset to be used solely to improve personal physical security, any use of the asset incidental to that purpose shall be ignored.

(6) Where the body corporate intends the asset to be used only partly to improve personal physical security, subsection (4) shall apply only to that part of the expense incurred in relation to the asset which is attributable to the intended use for that purpose.

(7) Subsection (4) shall only apply to an expense incurred in relation to a service referred to in subsection (3) where the benefit resulting to the director or employee consists wholly or mainly of an improvement of his or her personal physical security.

(8) In determining whether or not this section applies in relation to an asset or service, the fact that—

(a) the asset becomes fixed to land (whether the land constitutes a dwelling or otherwise), or

(b) the director or employee is, or becomes, entitled—

(i) to the property in the asset, or

(ii) if the asset is a fixture, to any estate or interest in the land concerned,

or

(c) the asset or the service improves the personal physical security of a member of the director's or employee's family or household, as well as that of the director or employee,

does not exclude the expense incurred by the body corporate from coming within subsection (4).”.

Foster care payments etc.

11. —The Principal Act is amended in Chapter 1 of Part 7 by inserting the following after section 192A (inserted by the Finance Act 2004 ):

“192B.—(1) In this section—

‘carer’ means an individual who is or was a foster parent or relative or who takes care of an individual on behalf of the Health Service Executive;

‘foster parent’ has the meaning assigned to it in the Child Care (Placement of Children in Foster Care) Regulations 1995 (S.I. No. 260 of 1995);

‘relative’ has the meaning assigned to it in the Child Care (Placement of Children with Relatives) Regulations 1995 (S.I. No. 261 of 1995).

(2) This section applies to payments made—

(a) to a carer by the Health Service Executive in accordance with—

(i) article 14 of the Child Care (Placement of Children in Foster Care) Regulations 1995, or

(ii) article 14 of the Child Care (Placement of Children with Relatives) Regulations 1995,

(b) at the discretion of the Health Service Executive to a carer in respect of an individual—

(i) who had been in the care of a carer until attaining the age of 18 years,

(ii) in respect of whom a payment referred to in paragraph (a) had been paid until the individual attained the age of 18 years,

(iii) who since attaining the age of 18 years continues to reside with a carer, and

(iv) who has not attained the age of 21 years or where the person has attained such age, suffers from a disability or is in receipt of full-time instruction at any university, college, school or other educational establishment and such disability or instruction commenced before the person attained the age of 21 years,

or

(c) in accordance with the law of any other Member State of the European Communities which corresponds to the payments referred to in paragraph (a) or (b).

(3) Payments to which this section applies are exempt from income tax and shall not be taken into account in computing total income for the purposes of the Income Tax Acts.”.

State employees: foreign service allowances.

12. —The Principal Act is amended in Chapter 1 of Part 7 by inserting the following section after section 196:

“196A.—(1) Where any allowance to, or emoluments of, an officer of the State are certified by the Minister for Finance, having consulted with the Minister for Foreign Affairs, or with such Minister of the Government as the Minister for Finance considers appropriate in the circumstances, to represent compensation for the extra cost of having to live outside the State in order to perform his or her duties, that allowance, or those emoluments, shall be disregarded as income for the purposes of the Income Tax Acts.

(2) In this section—

‘emoluments’ means emoluments to which section 985A applies;

‘officer of the State’ means—

(a) a civil servant within the meaning of section 1(1) of the Civil Service Regulation Act 1956 ,

(b) a member of the Garda Síochána, or

(c) a member of the Permanent Defence Force.

(3) This section is deemed to have applied as on and from 1 January 2005.”.

Credit in respect of tax deducted from emoluments of certain directors.

13. —Chapter 4 of Part 42 of the Principal Act is, as respects the year of assessment 2005 and subsequent years of assessment, amended by inserting the following after section 997:

“997A.—(1) (a) In this section—

‘control’ has the same meaning as in section 432;

‘ordinary share capital’, in relation to a company, means all the issued share capital (by whatever name called) of the company.

 (b) For the purposes of this section—

(i) a person shall have a material interest in a company if the person, either on the person's own or with any one or more connected persons, or if any person connected with the person with or without any such other connected persons, is the beneficial owner of, or is able, directly or through the medium of other companies or by any other indirect means, to control, more than 15 per cent of the ordinary share capital of the company, and

(ii) the question of whether a person is connected with another person shall be determined in accordance with section 10.

(2) This section applies to a person to who, in relation to a company (hereafter in this section referred to as ‘the company’), has a material interest in the company.

(3) Notwithstanding any other provision of the Income Tax Acts or the regulations made under this Chapter, no credit for tax deducted from the emoluments paid by the company to a person to whom this section applies shall be given in any assessment raised on the person or in any statement of liability sent to the person under Regulation 37 of the Income Tax (Employments) (Consolidated) Regulations 2001 (S.I. No. 559 of 2001) unless there is documentary evidence to show that the tax deducted has been remitted by the company to the Collector-General in accordance with the provisions of those regulations.

(4) Where the company remits tax to the Collector-General which has been deducted from emoluments paid by the company, the tax remitted shall be treated as having been deducted from emoluments paid to persons other than persons to whom this section applies in priority to tax deducted from persons to whom this section applies.

(5) Where, in accordance with subsection (4), tax remitted to the Collector-General by the company is to be treated as having been deducted from emoluments paid by the company to persons to whom this section applies, the tax to be so treated shall, if there is more than one such person, be treated as having been deducted from the emoluments paid to each such person in the same proportion as the emoluments paid to the person bears to the aggregate amount of emoluments paid by the company to all such persons.”.

Amendment of section 950 (interpretation (Part 41)) of Principal Act.

14. —As respects the year of assessment 2005 and subsequent years of assessment, section 950 of the Principal Act is amended, in the definition of “chargeable person” in subsection (1), by substituting the following for paragraph (a):

“(a) whose only source or sources of income for the chargeable period is or are sources the income from which consists of emoluments to which Chapter 4 of Part 42 applies, but for this purpose a person who, in addition to such source or sources of income, has another source or other sources of income shall be deemed for the chargeable period to be a person whose only source or sources of income for the chargeable period is or are sources the income from which consists of emoluments to which Chapter 4 of Part 42 applies if the income from that other source or those other sources is taken into account in determining the amount of his or her tax credits and standard rate cut-off point for the chargeable period applicable to those emoluments, and, for the purposes of deciding whether such income should be so taken into account, the Revenue Commissioners may have regard to the amount for that, or any previous, chargeable period of the income of the person from that other source or those other sources before deductions, losses, allowances and other reliefs,”.

Amendment of Chapter 1 (payments in respect of professional services by certain persons) of Part 18 of, and Schedule 13 to, Principal Act.

15. —(1) Chapter 1 of Part 18 of the Principal Act is amended in section 520(1) in the definition of “relevant payment”—

(a) in paragraph (ii) by substituting “section,” for “section, and”,

(b) in paragraph (iii) by substituting “payment, and” for “payment;”, and

(c) by inserting the following after paragraph (iii):

“(iv) a payment by one accountable person to—

(I) another accountable person being a person whose income is exempt from corporation tax or is disregarded for the purposes of the Tax Acts, or

(II) a body which has been granted an exemption from tax for the purposes of section 207;”.

(2) Schedule 13 to the Principal Act is amended—

(a) by substituting “13. Public Appointments Service.” for paragraph 13,

(b) by substituting “35. Dublin Airport Authority public limited company.” for paragraph 35,

(c) by deleting paragraph 87,

(d) by inserting the following after paragraph 143 (inserted by the Finance Act 2004 ):

“144. National Treatment Purchase Fund Board.

145. The Mental Health Commission.

146. Crisis Pregnancy Agency.

147. Commission on Electronic Voting.

148. Irish Medicines Board.

149. National Educational Welfare Board.

150. Oifig Choimisinéir na dTeangacha Oifigiúla.

151. The Health Service Executive.

152. Commission for Public Service Appointments.

153. Commission for Taxi Regulation.”.

(3) (a) Subsection (1) comes into operation with effect as on and from the passing of this Act.

(b) Paragraph (a) of subsection (2) shall be deemed to have come into force and shall take effect as on and from 19 October 2004.

(c) Paragraph (b) of subsection (2) shall be deemed to have come into force and shall take effect as on and from 1 October 2004.

(d) Paragraph (c) of subsection (2) shall be deemed to have come into force and shall take effect as on and from 1 January 2005.

(e) Paragraph (d) of subsection (2) comes into operation on 1 May 2005.

Amendment of section 128 (tax treatment of directors of companies and employees granted rights to acquire shares or other assets) of Principal Act.

16. —(1) Section 128 of the Principal Act is amended in subsection (2) by inserting “and shall be so chargeable notwithstanding that he or she was not resident in the State on the date on which the right was obtained” after “in accordance with this section”.

(2) (a) Subsection (1) applies as respects a right (within the meaning of section 128 of the Principal Act) obtained on or after the coming into operation of this section.

(b) This section comes into operation on such day as the Minister for Finance may appoint by order.

Restriction of deductions for employee benefit contributions.

17. —Chapter 6 of Part 4 of the Principal Act is, with effect from 3 February 2005, amended by inserting the following section after section 81:

“81A.—(1) (a) In this section—

‘accident benefit scheme’ means an employee benefit scheme under which benefits may be provided only by reason of a person's disablement, or death, caused by an accident occuring during the person's service as an employee of the employer;

‘chargeable period’ has the same meaning as in section 321;

‘employee benefit scheme’ means a trust, scheme or other arrangement for the benefit of persons who are employees of an employer;

‘qualifying expenses’, in relation to a third party and an employee benefit scheme, does not include expenses that, if incurred by the employer, would not be allowed as a deduction in calculating the profits or gains of the employer to be charged to tax under Case I or II of Schedule D but, subject to the foregoing, includes any expenses of the third party (apart from the provision of benefits to employees of the employer) incurred in the operation of the employee benefit scheme.

(b) For the purposes of this section—

(i) an employer makes an employee benefit contribution if—

(I) the employer pays money or transfers an asset to another person (referred to in this section as the ‘third party’), and

(II) the third party is entitled or required, under the provisions of an employee benefit scheme, to retain or use the money or asset for or in connection with the provision of benefits to employees of the employer,

(ii) qualifying benefits are provided where there is a payment of money or a transfer of assets, otherwise than by way of a loan, and the recipient or a person other than the recipient is or would, if resident, ordinarily resident and domiciled in the State, be chargeable to income tax in respect of the provision of such benefits, and

(iii) a reference to a person's employee includes a reference to the holder of an office under that person.

(2) (a) This section applies where—

(i) a calculation is made of the amount of a person's profits or gains to be charged to tax under Case I or II of Schedule D for a chargeable period beginning on or after 3 February 2005, and

(ii) a deduction would, but for this section, be allowed by the Tax Acts for that period in respect of employee benefit contributions made, or to be made, by that person (referred to in this section as the ‘employer’).

(b) Notwithstanding paragraph (a), this section does not apply in respect of a deduction referred to in subsection (7).

(3) (a) A deduction in respect of employee benefit contributions referred to in subsection (2)(a) shall be allowed only to the extent that, during the chargeable period in question or within 9 months from the end of it—

(i) qualifying benefits are provided out of the contributions, or

(ii) qualifying expenses are paid out of the contributions.

(b)   (i) For the purposes of paragraph (a), any qualifying benefits provided or qualifying expenses paid by the third party after the receipt by the third party of employee benefit contributions shall be regarded as being provided or paid out of those contributions, up to the total amount of the contributions as reduced by the amount of any benefits or expenses previously provided or paid as referred to in paragraph (a).

(ii) In the application of this paragraph, no account shall be taken of any other amount received or paid by the third party.

(4) (a) An amount which is disallowed under subsection (3) shall be allowed as a deduction for a subsequent chargeable period to the extent that qualifying benefits are provided out of the employee benefit contributions in question before the end of that subsequent chargeable period.

(b)   (i) For the purposes of paragraph (a), any qualifying benefits provided by the third party after the receipt by the third party of employee benefit contributions shall be regarded as being provided out of those contributions, up to the total amount of the contributions as reduced by the amount of any benefits or expenses previously provided or paid as referred to in subsection (3)(a) or paragraph (a) of this subsection.

(ii) In the application of this paragraph, no account shall be taken of any other amount received or paid by the third party.

(5) (a) This subsection applies where the provision of a qualifying benefit takes the form of the transfer of an asset.

(b) The amount provided shall be taken for the purposes of this section to be the total of—

(i)   (I) the amount, if any, expended on the asset by the third party, or

(II) where the asset consists of new shares in the third party, or rights in respect of such shares, issued by the third party, the market value of those shares or rights, as the case may be, at the time of the transfer,

and

(ii) in a case in which the asset was transferred to the third party by the employer, the amount of the deduction that would be allowed as referred to in subsection (2) in respect of the transfer.

(c) Where the amount calculated in accordance with paragraph (b) is greater than the amount (referred to in this paragraph as the ‘second-mentioned amount’) in respect of which an employee is chargeable to income tax in respect of the transfer, the deduction to be allowed in accordance with subsection (3) or (4) shall not exceed the second-mentioned amount.

(6) In any case where the calculation referred to in subsection (2)(a) is made before the end of the 9 month period mentioned in subsection (3)—

(a) for the purposes of making the calculation, subsection (3) shall be construed as if the reference to that 9 month period were a reference to the period ending at the time when the calculation is made, and

(b) after the end of the 9 month period the calculation shall if necessary be adjusted to take account of any benefits provided, expenses paid or contributions made within that period but after the time of the calculation.

(7) This section does not apply in relation to any deduction that is allowable—

(a) in respect of anything given as consideration for goods or services provided in the course of a trade or profession,

(b) in respect of contributions under an accident benefit scheme,

(c) under Part 17, or

(d) under Part 30.”.

Amendment of section 130 (matters to be treated as distributions) of Principal Act.

18. —(1) Section 130 of the Principal Act is amended—

(a) by substituting “section 131;” for “section 131.” in subsection (2)(e),

(b) by inserting the following after paragraph (e) of subsection (2):

“(f) any qualifying amount (within the meaning of subsection (2C)) paid to an individual who at the time that amount is paid—

(i) is a beneficiary under the terms of a trust deed of an employee share ownership trust approved of by the Revenue Commissioners under Schedule 12 and for which approval has not been withdrawn and which trust deed contains provision for the transfer of securities to the trustees of a scheme approved of by the Revenue Commissioners under Schedule 11 and for which approval has not been withdrawn, and

(ii) would be eligible to have securities appropriated to him or her, had such securities been available for appropriation, under the scheme referred to in subparagraph (i).”,

and

(c) by inserting the following after subsection (2B):

“(2C) Notwithstanding section 519(6) and paragraph 13(4) of Schedule 12, ‘qualifying amount’ means an amount paid solely out of income consisting of dividends received in a chargeable period (within the meaning of section 321) in respect of securities (within the meaning of Schedule 12) held by the trustees of the employee share ownership trust referred to in subsection (2)(f)(i), but only to the extent that such income exceeds the aggregate of—

(a) any sum or sums spent to meet expenses of the trust,

(b) any interest paid on sums borrowed by the trust,

(c) any sum or sums paid to the personal representatives of a deceased person who was a beneficiary under the terms of the trust deed,

(d) any amount spent on the repayment of sums borrowed including any amount capable of being so spent, having regard to the conditions referred to in paragraph 11(2B)(d) or 11A(5)(d) of Schedule 12, and

(e) any amount spent on the acquisition of securities (within the meaning of Schedule 12) including any amount capable, at any particular time, of being so spent on such securities at their market value (within the meaning of section 548) at that time,

in the chargeable period.”.

(2) This section comes into operation on 3 February 2005.

Reliefs in respect of income tax charged on payments on retirement.

19. —(1) The Principal Act is amended—

(a) in section 201—

(i) by inserting the following after subsection (2):

“(2A) Where a payment is not chargeable to tax under section 123 by virtue of subsection (2)(a), the person by whom the payment was made shall deliver to the inspector, not later than 46 days after the end of the year of assessment in which the payment was made, the following particulars—

(a) the name and address of the person to whom the payment was made,

(b) the personal public service number (within the meaning of section 223 of the Social Welfare (Consolidation) Act 1993 ) of the person who received the payment,

(c) the amount of the payment, and

(d) the basis on which the payment is not chargeable to tax under section 123, indicating, in the case of a payment made on account of injury or disability, the extent of the injury or disability, as the case may be.”,

and

(ii) by substituting, in subsection (6), “4 years” for “6 years”,

and

(b) in Schedule 3 by substituting, in the formula in paragraph 10, “3 years” for “5 years” in the construction of “T” and “3 years” for “5 years” in the construction of “I”.

(2) (a) Paragraph (a) of subsection (1) shall apply as respects payments made on or after the passing of this Act.

(b) Paragraph (b) of subsection (1) shall apply as respects the year of assessment 2005 and subsequent years of assessment.

Tax rate applicable to certain deposit interest received by individuals.

20. —(1) Part 8 of the Principal Act is amended by inserting the following Chapter after Chapter 6:

Chapter 7

Certain interest from sources within the European Communities

Tax rate applicable to certain deposit interest received by individuals.

267M.—(1) In this section—

‘specified interest’ means interest arising in a Member State of the European Communities other than the State which would be interest payable in respect of a relevant deposit within the meaning of section 256(1) if—

(a) in the definition of ‘relevant deposit’ in section 256(1)—

(i) the following were substituted for paragraphs (c) and (d):

‘(c) which, in the case of a relevant deposit taker which, by virtue of the law of a Member State of the European Communities other than the State, is resident for the purposes of tax in such a Member State, is held at a branch of the relevant deposit taker situated in a territory which is not a Member State,

(d) which, in the case of a relevant deposit taker not so resident in a Member State of the European Communities for the purposes of tax, is held otherwise than at a branch of the relevant deposit taker situated in a Member State,’,

and

(ii) paragraph (g) were deleted,

and

(b) there were included in the definition of ‘relevant deposit taker’ in section 256(1) bodies established in accordance with the law of any Member State of the European Communities other than the State which corresponds to—

(i) the Credit Union Act 1997 ,

(ii) the Trustee Savings Banks Acts 1989 and 2001, or

(iii) the Post Office Savings Bank Acts 1861 to 1958;

‘tax’ in relation to a Member State other than the State means tax which corresponds to income tax or corporation tax in the State.

(2) (a) Notwithstanding any provision of the Income Tax Acts and subject to paragraph (b), the amount of taxable income on which a person who is an individual is charged to income tax at the standard rate for any year shall be increased by an amount equal to the amount of specified interest of that person on which income tax for that year falls to be computed.

(b) Paragraph (a) shall not apply where any liability of the individual for a year of assessment in respect of the specified interest has not been discharged on or before the specified return date for the chargeable period (within the meaning of section 950) for that year.”.

(2) This section applies for the year of assessment 2005 and subsequent years of assessment.

Retirement benefits.

21. —(1) The Principal Act is amended—

(a) in Chapter 1 of Part 30—

(i) in section 770(1)—

(I) by substituting the following for the definition of “administrator”:

“ ‘administrator’, in relation to a retirement benefits scheme, means the person or persons, established in a Member State of the European Communities, having the management of the scheme, and references to the administrator of a scheme shall be deemed to include the person mentioned in section 772(2)(c)(ii);”,

(II) by inserting the following after the definition of “final remuneration”:

“ ‘overseas pension scheme’ means a retirement benefits scheme, other than a state social security scheme, which is—

(a) operated or managed by an Institution for Occupational Retirement Provision as defined by Article 6(a) of Directive 2003/41/EC of the European Parliament and of the Council of 3 June 20031 , and

(b) established in a Member State of the European Communities, other than the State, which has given effect to that Directive in its national law;”,

(III) by inserting the following after the definition of “relevant date”:

“ ‘retirement benefits scheme’ has the meaning assigned to it by section 771;”,

and

(IV) by inserting the following after the definition of “service”:

“ ‘state social security scheme’ means a system of mandatory protection put in place by the Government of a country or territory, other than the State, to provide a minimum level of retirement income or other benefits, the level of which is determined by that Government;”,

(ii) in section 771(2) by inserting “contract,” after “References in this Chapter to a scheme include references to a”,

(iii) in section 772(2) by substituting the following for paragraph (c):

“(c) that in relation to the discharge of all duties and obligations imposed on the administrator of a scheme by this Chapter—

(i) the administrator of an overseas pension scheme has entered into a contract with the Revenue Commissioners enforceable in a Member State of the European Communities in relation to the discharge of those duties and obligations and in entering into such a contract the parties to the contract have acknowledged and agreed in writing that—

(I) it is governed solely by the laws of the State, and

(II) that the courts of the State have exclusive jurisdiction in determining any dispute arising under it,

or

(ii) there is a person resident in the State, appointed by the administrator, who will be responsible for the discharge of all of those duties and obligations and the administrator shall notify the Revenue Commissioners of the appointment of that person and the identity of that person;”,

(iv) in section 774 by substituting the following for subsection (1):

“(1) This section shall apply as respects—

(a) any approved scheme shown to the satisfaction of the Revenue Commissioners to be established under irrevocable trusts,

(b) any approved scheme which is an overseas pension scheme, or

(c) any other approved scheme as respects which the Revenue Commissioners, having regard to any special circumstance, direct that this section shall apply,

and any scheme which is for the time being within paragraph (a), (b) or (c) is in this Chapter referred to as an ‘exempt approved scheme’.”,

and

(v) in section 779 by substituting the following for subsection (1):

“(1) Subject to subsection (2), pensions paid under any scheme, including an overseas pension scheme, which is approved or is being considered for approval under this Chapter shall, notwithstanding anything in section 18 or 19, be charged to tax under Schedule E, and Chapter 4 of Part 42 shall apply accordingly.”,

(b) in Chapter 2 of Part 30—

(i) in section 784—

(I) by substituting the following for subsection (2)(a)(i):

“(i) that it is made by the individual with a person lawfully carrying on the business of granting annuities on human life, and, where that person—

(I) is not resident in the State, or

(II) is not trading in the State through a fixed place of business,

that person is an insurance undertaking authorised to transact insurance business in the State under Directive 2002/83/EC of the European Parliament and of the Council of 5 November 20021 ,”,

(II) in subsection (2B)(a) by substituting “shall, notwithstanding anything in section 18 or 19,” for “shall” where it first occurs, and

(III) by inserting the following after subsection (4):

“(4A) At any time when the person referred to in subsection (2)(a)(i) or in section 785(1)—

(a) is not resident in the State, or

(b) is not trading in the State through a fixed place of business,

the person shall, in relation to the discharge of all duties and obligations imposed by this section or, as the case may be, by section 785—

(i) enter into a contract with the Revenue Commissioners enforceable in a Member State of the European Communities in relation to the discharge of those duties and obligations and in entering into such a contract the parties to the contract shall acknowledge and agree in writing that—

(I) it is governed solely by the laws of the State, and

(II) that the courts of the State shall have exclusive jurisdiction in determining any dispute arising under it,

or

(ii) ensure that there is a person resident in the State (referred to in this paragraph as the ‘appointed person’), appointed by the person, to be responsible for the discharge of those duties and obligations and the person shall notify the Revenue Commissioners of the appointment of the appointed person and the identity of the appointed person.

(4B) The Revenue Commissioners may by notice in writing require the person to whom premiums are payable under any contract for the time being approved under this section or under section 785, or the appointed person referred to in subsection (4A)(ii), as the case may be, to provide, within 30 days of the date of such notice, such information and particulars as may be specified in the notice as they may reasonably require for the purposes of this Chapter, and, without prejudice to the generality of the foregoing, such information and particulars may include—

(a) the name, address and PPS Number (within the meaning of section 787A(1)) of the individual with whom the contract has been made,

(b) the name, address and PPS Number (within that meaning) of the individual or individuals to whom any payment of an annuity in respect of the contract has been made, and

(c) the amount of the annuity payments referred to in paragraph (b).”,

(ii) in section 784A—

(I) in subsection (3)(a) by substituting “shall, notwithstanding anything in section 18 or 19,” for “shall” where it first occurs,

(II) in subsection (7) by substituting the following for paragraph (a):

“(a) At any time when the qualifying fund manager—

(i) is not resident in the State, or

(ii) is not trading in the State through a fixed place of business,

the qualifying fund manager shall, in relation to the discharge of all duties and obligations relating to approved retirement funds which are imposed on the qualifying fund manager by virtue of this Chapter—

(I) enter into a contract with the Revenue Commissioners enforceable in a Member State of the European Communities in relation to the discharge of those duties and obligations and in entering into such a contract the parties to the contract shall acknowledge and agree in writing that—

(A) it shall be governed solely by the laws of the State, and

(B) that the courts of the State shall have exclusive jurisdiction in determining any dispute arising under it,

or

(II) ensure that there is a person resident in the State, appointed by the qualifying fund manager, who will be responsible for the discharge of all of those duties and obligations and shall notify the Revenue Commissioners of the appointment of that person and the identity of that person.”,

and

(III) by inserting the following subsection after subsection (8):

“(9) The Revenue Commissioners may by notice in writing require a qualifying fund manager or the person appointed under subsection (7)(a)(II), as the case may be, to provide within 30 days of the date of such notice, such information and particulars as may be specified in the notice as they may reasonably require for the purposes of this Chapter, and without prejudice to the generality of the foregoing, such information and particulars may include—

(a) the name, address and tax reference number of the individual in whose name the approved retirement fund is or was held,

(b) the name, address and tax reference number of any individual to whom any distribution has been made, and

(c) the amount of any distributions referred to in paragraph (b).”,

(iii) in section 784C(4)(a) by substituting “is in receipt of” for “is entitled to”, and

(iv) in section 785 by inserting the following after subsection (1):

“(1A) For the purposes of subsection (1), the reference in subsection (1) to a person lawfully carrying on in the State the business of granting annuities on human life shall include a reference to an insurance undertaking, authorised to transact insurance business in the State under Directive 2002/83/EC of the European Parliament and of the Council of 5 November 20021 , that—

(a) is not resident in the State, or

(b) is not trading in the State through a fixed place of business.”,

(c) in Chapter 2A—

(i) in subsection (1) of section 787A by substituting “in accordance with section 787G(5)(ii)” for “in accordance with section 787G(5)”, in the definition of “PRSA administrator”,

(ii) in section 787G—

(I) in subsection (1)(a) by substituting “shall, notwithstanding anything in section 18 or 19,” for “shall”, where it first occurs,

(II) by substituting the following for subsection (5):

“(5) At any time when a PRSA administrator—

(a) is not resident in the State, or

(b) is not trading in the State through a fixed place of business,

the PRSA administrator shall, in relation to the discharge of all duties and obligations relating to Personal Retirement Savings Accounts which are imposed on the PRSA administrator by virtue of this Chapter—

(i) enter into a contract with the Revenue Commissioners enforceable in a Member State of the European Communities in relation to the discharge of those duties and obligations and in entering into such a contract the parties to the contract shall acknowledge and agree in writing that—

(I) it shall be governed solely by the laws of the State, and

(II) that the courts of the State shall have exclusive jurisdiction in determining any dispute arising under it,

or

(ii) ensure that there is a person resident in the State, appointed by the PRSA administrator, who will be responsible for the discharge of all of those duties and obligations and shall notify the Revenue Commissioners of the appointment of that person and the identity of that person.”,

and

(III) by inserting the following subsection after subsection (5):

“(5A) The Revenue Commissioners may by notice in writing require a PRSA administrator, a PRSA provider or the person appointed under subsection (5)(ii), as the case may be, to provide, within 30 days of the date of such notice, such information and particulars as may be specified in the notice as they may reasonably require for the purposes of this Chapter, and, without prejudice to the generality of the foregoing, such information and particulars may include—

(a) the name, address and PPS Number of the PRSA contributor,

(b) the name, address and PPS Number of any person to whom any payments have been made, or to whom any assets have been made available, by the PRSA administrator or the PRSA provider, and

(c) the amount of any payments and the value of any assets referred to in paragraph (b).”,

(d) by inserting the following after Chapter 2A—

Chapter 2B

Overseas Pension Plans: Migrant Member Relief

Interpretation and general (Chapter 2B).

787M.—(1) In this Chapter, unless the context otherwise requires—

‘administrator’, in relation to an overseas pension plan, means the person or persons having the management of the plan;

‘contributions’ include premia;

‘certificate of contributions’ means a certificate obtained by the relevant migrant member from the administrator and provided to the Revenue Commissioners, in a form to be furnished by the Revenue Commissioners for that purpose, containing for each calendar year the following particulars in respect of the relevant migrant member of the plan—

(a) his or her name, address, PPS Number and policy reference number,

(b) the contributions paid by him or her under the plan in that year, and

(c) where relevant, the contributions, if any, paid under the plan in that year in respect of him or her by, or on behalf of, his or her employer;

‘overseas pension plan’ means a contract, an agreement, a series of agreements, a trust deed or other arrangements, other than a state social security scheme, which is established in, or entered into under the law of, a Member State of the European Communities, other than the State;

‘national of a Member State of the European Communities’ means any individual possessing the nationality or citizenship of a Member State of the European Communities;

‘policy reference number’ means the unique identifying number of a relevant migrant member in relation to an overseas pension plan;

‘PPS Number’ means a personal public service number within the meaning of section 223 of the Social Welfare (Consolidation) Act 1993 ;

‘qualifying overseas pension plan’ means an overseas pension plan—

(a) which is in good faith established for the sole purpose of providing benefits of a kind similar to those referred to in Chapters 1, 2, or 2A of this Part,

(b) in respect of which tax relief is available under the law of the Member State of the European Communities in which the plan is established in respect of any contributions paid under the plan, and

(c) in relation to which the relevant migrant member of the plan complies with the requirements of subsection (2);

‘relevant migrant member’ means an individual who is a resident of the State and who is a member of a qualifying overseas pension plan and who, in relation to any contributions paid under the plan—

(a) was, at the time the individual first became a member of the pension plan, a resident of a Member State of the European Communities, other than the State, and entitled to tax relief in respect of contributions paid under the plan under the law of that Member State of the European Communities,

(b) was a member of the pension plan at the beginning of the period in which the individual became a resident of the State,

(c) was, immediately before the beginning of that period, resident outside of the State for a continuous period of 3 years, and

(d) (i) is a national of a Member State of the European Communities, or

(ii) not being such an individual, was a resident of a Member State of the European Communities, other than the State, immediately before becoming a resident of the State;

‘resident’ means—

(a) in the case of a Member State of the European Communities with the Government of which arrangements having the force of law by virtue of section 826(1)(a) have been made, that the individual is regarded as being a resident of that State under those arrangements, and

(b) in any other case, that the individual is by virtue of the law of that State a resident of that State for the purposes of tax;

‘state social security scheme’ means a system of mandatory protection put in place by the Government of a country or territory, other than the State, to provide a minimum level of retirement income or other benefits, the level of which is determined by that Government;

‘tax reference number’ means, in relation to an institution operating or managing an overseas pension plan, the unique identification number allocated to the institution by a Member State of the European Communities, other than the State, for the purposes of taxation, and where more than one such number has been allocated, the reference number appropriate to the business in the course of which the overseas pension plan was issued.

(2) The requirements referred to in paragraph (c) of the definition of ‘qualifying overseas pension plan’ in subsection (1) are that the relevant migrant member—

(a) obtains from the administrator of the plan and provides to the Revenue Commissioners in such form and manner as they may specify—

(i) such evidence as they may reasonably require to verify the position in relation to paragraphs (a) and (b) of the definition of ‘qualifying overseas pension plan’ in subsection (1), and

(ii) the following particulars in relation to the plan—

(I) the name, address and tax reference number of the institution operating or managing the plan,

(II) the policy reference number of the relevant migrant member of the plan,

(III) the date on which the relevant migrant member became a member of the plan,

(IV) the date on which contributions under the plan first became payable,

(V) the date on which benefits under the plan first become payable,

and

(b) has irrevocably instructed the administrator of the plan to provide to the Revenue Commissioners such information as they may reasonably require in relation to any payments made under the plan.

Qualifying overseas pension plans: relief for contributions.

787N.—(1) Where in any year of assessment, contributions are paid to any qualifying overseas pension plan—

(a) by a relevant migrant member of that plan, or

(b) by, or on behalf of, an employer in respect of an employee (within the meaning of Chapter 1) who is a relevant migrant member of that plan,

then, where the relevant migrant member has provided a certificate of contributions, relief for that year of assessment under the provisions of section 774(6), 774(7) and 778(1) of Chapter 1 (which relates to occupational pension schemes), or, as the case may be, section 787 of Chapter 2 (which relates to retirement annuities), or sections 787C, 787E, 787F or 787J of Chapter 2A (which relates to personal retirement savings accounts), shall, with any necessary modifications, apply to those contributions as if—

(i) the qualifying overseas pension plan was an exempt approved scheme under Chapter 1 or an annuity contract for the time being approved by the Revenue Commissioners under Chapter 2, or a PRSA product approved under Chapter 2A for the purposes of section 94(3) of the Pensions Act 1990 , and

(ii) the relevant migrant member of the qualifying overseas pension plan was—

(I) an employee within the meaning of Chapter 1,

(II) an individual referred to in section 784(1) of Chapter 2, or

(III) an individual referred to in Chapter 2A.

(2) An individual who would be a relevant migrant member of a qualifying overseas pension plan but for the fact that he or she fails to meet the requirement in paragraph (c) of the definition of ‘relevant migrant member’ in section 787M shall, notwithstanding that, be treated as a relevant migrant member if the Revenue Commissioners are of the opinion that in all the circumstances the failure of the individual to meet the condition ought to be disregarded for that purpose.

(3) (a) The Revenue Commissioners may by notice in writing require the administrator of a qualifying overseas pension plan who has received an irrevocable instruction as provided for in section 787M(2)(b), to provide within 30 days of the date of such notice such information and particulars, in relation to payments under the plan, as the Revenue Commissioners may reasonably require for the purposes of this Chapter.

(b) The notice referred to in paragraph (a) shall specify—

(i) the information and particulars required by the Revenue Commissioners, and

(ii) the form and manner in which such information and particulars are to be provided.”,

(e) in Chapter 4—

(i) by substituting the following for section 790A:

“Limit on earnings.

790A.—Notwithstanding anything in this Part, for the purposes of giving relief to an individual under—

(a) Chapter 1 in respect of an employee's contribution to a retirement benefits scheme,

(b) Chapter 2 in respect of a qualifying premium under an annuity contract,

(c) Chapter 2A in respect of a PRSA contribution, and

(d) Chapter 2B in respect of a contribution to an overseas pension plan,

the aggregate of the individual's remuneration, within the meaning of Chapter 1 and that Chapter as applied by Chapter 2B, and net relevant earnings, within the meaning of Chapters 2 and 2A and those Chapters as applied by Chapter 2B, shall not exceed €254,000.”,

and

(ii) by inserting the following after section 790A:

“Exemption of crossborder scheme.

790B.—(1) In this section—

‘competent authority’, in relation to the State, means the national authority designated to carry out the duties provided for in the Directive arising from the transposition of the Directive into the law of the State;

‘Directive’ means Directive 2003/41/EC of the European Council and of the Parliament of 3 June 20031 on the activities and supervision of institutions for occupational retirement provision;

‘European undertaking’, in relation to a scheme, means an undertaking located in a European State which makes or proposes to make contributions to a scheme in respect of European members;

‘European members’ means individuals who are or have been employed or selfemployed in a European State and in respect of which employment or self employment the trustees of the scheme have accepted or propose to accept contributions from the European undertaking;

‘European State’ means a Member State of the European Communities other than the State;

‘scheme’ means an occupational pension scheme established in the State under irrevocable trusts which provides, or is capable of providing, retirement benefits (within the meaning of Article 6(d) of the Directive) in relation to European members;

‘trustees’, in relation to a scheme, means the trustees of the scheme;

‘undertaking’ means any undertaking or other body, regardless of whether it includes or consists of one or more persons, which acts as an employer or as an association, or other representative body, of self employed persons.

(2) Subsections (3) and (4) shall apply to any scheme in respect of which, arising from the transposition of the Directive into the law of the State, the trustees have received from the competent authority—

(a) an authorisation, and

(b) an approval,

to accept contributions from a European undertaking in respect of European members, which authorisation has not been revoked.

(3) (a) Exemption from income tax shall, on a claim being made in that behalf, be allowed in respect of income derived from investments or deposits of a scheme, if or to such extent as the Revenue Commissioners are satisfied that, it is income from investments or deposits held for the purposes of the scheme.

(b)   (i) In this subsection ‘financial futures’ and ‘traded options’ mean respectively financial futures and traded options for the time being dealt in or quoted on any futures exchange or any stock exchange, whether or not that exchange is situated in the State.

(ii) For the purposes of paragraph (a), a contract entered into in the course of dealing in financial futures or traded options shall be regarded as an investment.

(c) Exemption from income tax shall, on a claim being made in that behalf, be allowed in respect of underwriting commissions if, or to such extent as the Revenue Commissioners are satisfied that, the underwriting commissions are applied for the purposes of the scheme, and in respect of which the trustees of the scheme would but for this subsection be chargeable to tax under Case IV of Schedule D.

(4) For the purposes of sections 172A(1), 256(1) and 739B(1), the reference to ‘an exempt approved scheme within the meaning of section 774’ in the definition of ‘pension scheme’ in those sections shall be deemed to include a reference to a scheme referred to in subsection (2).”,

(f) in Schedule 23—

(i) in paragraph 1 by inserting “in such form and manner as they may specify” after “Revenue Commissioners” where it first occurs,

(ii) in paragraph 2:

(I) by deleting “and” in subparagraph (b)(ii),

(II) in subparagraph (b)(iii) by substituting “employer, and,” for “employer;”, and

(III) by inserting the following after paragraph (b)(iii):

“(iv) payments by means of pension, gratuity or other like benefits;”,

(iii) by inserting the following after paragraph 2:

“2A Any such return, copy of accounts, information and particulars required to be provided under paragraph 2 shall be in such form and manner as may be specified in the notice under that paragraph.”,

and

(iv) in paragraph 4, subparagraph (2), by substituting “in section 772(2)(c)(ii).” for “in section 772(2)(c).”.

(2) (a) Paragraph (a) of subsection (1) shall apply as respects any retirement benefits scheme (within the meaning of section 771 of the Principal Act) approved on or after 1 January 2005.

(b) Paragraph (b), other than subparagraph (iii), of subsection (1) shall apply as respects any annuity contract for the time being approved by the Revenue Commissioners under section 784 of the Principal Act entered into on or after 1 January 2005.

(c) Subparagraph (iii) of paragraph (b) of subsection (1) shall apply as respects any exercise of an option in accordance with subsection (2A) of section 784 of the Principal Act, on or after 3 February 2005.

(d) Paragraph (c) of subsection (1) shall apply as respects any PRSA contract (within the meaning of section 787A of the Principal Act) entered into on or after 1 January 2005 in respect of a PRSA product (within the meaning of Part X of the Pensions Act 1990 ) approved by the Revenue Commissioners under section 787K of the Principal Act.

(e) Paragraph (d) of subsection (1) shall apply as respects contributions to a qualifying overseas pension plan made on or after 1 January 2005.

(f) Subparagraph (i) of paragraph (e) of subsection (1) shall apply as on and from 1 January 2005.

(g) Subparagraph (ii) of paragraph (e) of subsection (1) shall come into operation on such day or days as the Minister for Finance may by order appoint and different days may be appointed for different purposes or different provisions.

(h) Paragraph (f) of subsection (1) shall apply as on and from 1 January 2005.

1OJ No. L235, 23.9.2003, p.10

1OJ No. L345, 19.12.2002, p.1

1OJ No. L345, 19.12.2002, p.1

1OJ No. L235, 23.9.2003, p.10