Chapter 4

Corporation Tax

60 .— The Principal Act is amended—

(a) in section 4 by inserting the following after the definition of “profits”:

“ ‘SE’ means a European public limited-liability company (Societas Europaea or SE) as provided for by Council Regulation (EC) No. 2157/2001 of 8 October 2001, on the Statute for a European Company (SE) ³ ;

‘SCE’ means a European Cooperative Society (SCE) as provided for by Council Regulation (EC) No. 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE) ⁴ ;”,

(b) by inserting the following after section 23A:

“Residence of SE or SCE.

23B.— (1) An SE or an SCE which has its registered office in the State shall, subject to section 23A, be treated for the purposes of the Tax Acts and the Capital Gains Tax Acts as resident in the State.

(2) (a) An SE which transfers its registered office out of the State in accordance with Article 8 of Council Regulation (EC) No. 2157/2001 on the Statute for a European Company (SE), and

(b) an SCE which transfers its registered office out of the State in accordance with Article 7 of Council Regulation (EC) No. 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE),

shall not cease to be resident in the State by virtue only of that transfer.”,

(c) in section 616 by inserting the following after subsection (3):

“(3A) Where at any time the principal company of a group—

(a) (i) becomes an SE by reason of being the acquiring company in the formation of an SE by merger by acquisition (in accordance with Articles 2(1), 17(2)(a) and 29(1) of the SE Regulation (within the meaning of section 630)),

(ii) becomes a subsidiary of a holding SE (formed in accordance with Article 2(2) of that Regulation), or

(iii) is transformed into an SE (in accordance with Article 2(4) of that Regulation),

or

(b) becomes an SCE in the course of a merger in accordance with Article 2 of the SCE Regulation (within the meaning of section 630),

then the group of which it was the principal company before that time and any group of which the SE, or as the case may be the SCE, is a member on formation shall be regarded as the same, and the question of whether or not a company has ceased to be a member of a group shall be determined accordingly.”,

(d) by inserting the following after section 629:

“Company ceasing to be resident on formation of SE or SCE.

629A.— If at any time a company ceases to be resident in the State in the course of—

(a) the formation of an SE by merger, or

(b) the formation of an SCE,

then, whether or not the company continues to exist after the formation of the SE or (as the case may be) the SCE, the Tax Acts and the Capital Gains Tax Acts shall apply to any obligations of the company under this Act in relation to liabilities accruing and matters arising before that time—

(i) as if the company were still resident in the State, and

(ii) where the company has ceased to exist, as if the SE or (as the case may be) the SCE were the company.”,

(e) in Part 21—

(i) in section 630—

(I) in the definition of “bilateral agreement” by substituting “826(1)(a)” for “826”,

(II) in the definition of “the Directive”, by inserting “(as amended)” after “of different Member States”, and

(III) by inserting the following after the definition of “receiving company”:

“ ‘SE Regulation’ means Council Regulation (EC) No. 2157/2001 of 8 October 2001, on the Statute for a European Company (SE) ⁵ ;

‘SCE Regulation’ means Council Regulation (EC) No. 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE) ⁶ ;”,

(ii) by inserting the following after section 633:

“Formation of SE or SCE by merger — leaving assets in the State.

633A.— (1) For the purposes of this section an asset is a qualifying transferred asset if—

(a) the asset is transferred to an SE or an SCE as part of the process of the merger forming it,

(b) (i) the transferor in relation to the asset is resident in the State at the time of the transfer, or

(ii) any gain that would have accrued to the transferor in respect of the asset, had it disposed of the asset immediately before the time of the transfer, would have been a chargeable gain,

and

(c) (i) the transferee SE or SCE in relation to the asset is resident in the State on formation, or

(ii) any gain that would have accrued to the transferee SE or SCE in respect of the asset, if it disposed of the asset immediately after the transfer, would be a chargeable gain.

(2) For the purposes of this section and section 633B, a company is treated as resident for the purposes of tax in a Member State (other than the State) if—

(a) it is so treated by virtue of the law of the Member State, and

(b) it is not treated, for the purposes of double taxation relief arrangements to which the Member State is a party, as resident for the purposes of tax in a territory which is not a Member State, and for this purpose ‘tax’, in relation to a Member State other than the State, means any tax imposed in the Member State which corresponds to corporation tax in the State.

(3) This section applies where—

(a) (i) an SE is formed by the merger of 2 or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of the SE Regulation, or

(ii) an SCE is formed by a merger in accordance with Article 2 of the SCE Regulation,

(b) each merging company is resident for the purposes of tax in a Member State,

(c) the merging companies are not all resident for the purposes of tax in the same Member State, and

(d) section 615 does not apply to any qualifying transferred assets.

(4) Where this section applies, qualifying transferred assets shall be treated for the purpose of the Capital Gains Tax Acts and, in so far as they apply to chargeable gains, the Corporation Tax Acts as if acquired by the SE, or as the case may be the SCE, for a consideration resulting in neither gain or loss for the transferor.

(5) Where this section applies—

(a) the transfer of assets in the course of the merger shall be treated as not giving rise to any allowance or charge provided for by section 307 or 308,

(b) there shall be made to or on the SE or (as the case may be) the SCE in accordance with sections 307 and 308 all such allowances and charges as would, if the transferring company had continued to use the transferred assets for the purposes of its trade, have been made to or on the transferring company in respect of any assets transferred in the course of the merger, and the amount of any such allowance or charge shall be computed as if the SE or (as the case may be) the SCE had been carrying on the trade carried on by the transferring company since the transferring company began to do so and as if everything done to or by the transferring company had been done to or by the SE or (as the case may be) the SCE.

Formation of SE or SCE by merger — not leaving assets in the State.

633B.— (1) This section applies where—

(a) (i) an SE is formed by the merger of 2 or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of the SE Regulation, or

(ii) an SCE is formed by a merger in accordance with Article 2 of the SCE Regulation,

(b) each merging company is resident for the purposes of tax in a Member State,

(c) the merging companies are not all resident for the purposes of tax in the same Member State,

(d) in the course of the merger a company resident in the State transfers to a company resident in a Member State other than the State all assets and liabilities of a trade which the company resident in the State carried on in a Member State (other than the State) through a branch or agency, and

(e) the aggregate of the chargeable gains accruing to the company resident in the State on the transfer exceeds the aggregate of any allowable losses so accruing.

(2) Where this section applies, for the purposes of the Capital Gains Tax Acts and, in so far as they apply to chargeable gains the Corporation Tax Acts—

(a) the allowable losses accruing to the company resident in the State on the transfer shall be set off against the chargeable gains so accruing, and

(b) the transfer shall be treated as giving rise to a single chargeable gain equal to the aggregate of those gains after deducting the aggregate of those losses.

(3) Where this section applies, section 634 shall also apply.

Treatment of securities on a merger.

633C.— (1) This section applies where—

(a) (i) an SE is formed by the merger of 2 or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of the SE Regulation, or

(ii) an SCE is formed by a merger in accordance with Article 2 of the SCE Regulation,

(b) each merging company is resident for the purposes of tax in a Member State,

(c) the merging companies are not all resident for the purposes of tax in the same Member State, and

(d) the merger does not constitute or form part of a scheme of reconstruction or amalgamation within the meaning of section 587.

(2) Where this section applies, the merger shall be treated for the purposes of section 587 as if it were a scheme of reconstruction.”,

(iii) in section 634 by adding the following after subsection (2):

“(3) (a) Where—

(i) a company which is not resident in the State transfers the whole of a trade carried on by it, or a part of such a trade, to another company and the consideration for the transfer consists solely of the issue to the transferring company of securities in the receiving company, and

(ii) for the purposes of computing the income or gains of any person (in this subsection referred to as the ‘relevant person’) who is chargeable to tax in the State, income or gains of the transferring company are treated as being income, or as the case may be chargeable gains, of the relevant person and as not being income or chargeable gains of the transferring company,

then, in computing any liability to tax of the relevant person in respect of the transfer, an appropriate part of tax specified in a relevant certificate given by the tax authorities of the Member State in which the trade was so carried on shall be treated for the purposes of Chapter 1 of Part 35 as tax—

(I) payable under the law of that Member State, and

(II) in respect of which credit may be allowed under a bilateral agreement.

(b) For the purposes of this subsection, the appropriate part of tax on income or gains specified in a certificate in relation to a relevant person shall be so much of that tax as bears to the amount of that tax the same proportion as the part of any income, or as the case may be gains, of the transferring company in respect of the transfer which is treated as income, or as the case may be gains, of the relevant person bears to the amount of that income, or as the case may be gains, of the transferring company.”,

(iv) in section 635—

(I) by substituting “sections 631, 632, 633, 633A, 633C and 634” for “sections 631 to 634”, and

(II) by substituting “as respects a transfer, disposal or the formation of an SE or an SCE by merger unless it is shown that the transfer, disposal or merger, as the case may be” for “as respects a transfer or disposal unless it is shown that the transfer or disposal, as the case may be”,

and

(v) in section 636(2) by substituting “section 631, 632, 633, 633A, 633B, 633C or 634” for “section 631, 632, 633 or 634”,

and

(f) in Schedule 18A—

(i) by inserting the following after paragraph 1(3A)(a)(i):

“(ia) in a case in which (whether or not paragraph (a)(i)(I) also applies)—

(I) the company is an SE or an SCE resident in the State, and

(II) the asset was transferred to—

(A) the SE as part of the process of its formation by the merger by acquisition of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of the SE Regulation (within the meaning of section 630), or

(B) the SCE as part of the process of its formation by merger in accordance with Article 2 of the SCE Regulation (within the meaning of section 630),

are references to the asset becoming a chargeable asset in relation to the SE or (as the case may be) the SCE or, if at the time of the formation of the SE or (as the case may be) the SCE the asset was a chargeable asset in relation to a company which ceased to exist as part of the process of the formation of the SE or (as the case may be) the SCE, to the asset becoming a chargeable asset in relation to that company;”,

(ii) in paragraph 1(3A)(b) by inserting “or, if the company is an SE or an SCE, by reason of the asset having been transferred to the SE or (as the case may be) the SCE on its formation” after “at that time”, and

(iii) in paragraph 1(6)(a) by inserting “or (3A)” after “subsection (3)”.

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

(a) in section 76A(2) by substituting “Schedule 17A shall apply to a company as respects any matter related to the computation of income of the company where as respects that matter” for “Schedule 17A shall apply to a company where”,

(b) by inserting the following after section 76C:

“Computation of income from finance leases.

76D.— (1) In this section ‘finance lease’ means a lease which, under generally accepted accounting practice, falls to be treated as a finance lease.

(2) Notwithstanding section 76A and subject to section 80A, for the purposes of computing income of a company from a trade of leasing, income of a lessor from a finance lease—

(a) shall not be the amount of income from the lease computed in accordance with generally accepted accounting practice, and

(b) shall be computed, subject to the provisions of the Corporation Tax Acts other than section 76A, by treating—

(i) lease payments receivable in respect of the lease as trading receipts of the trade, and

(ii) as trading expenses of the trade any disbursements or expenses laid out or expended for the purposes of earning those lease payments.”,

(c) in section 243(6), by substituting the following for paragraph (a):

“(a) the payment is not ultimately borne by the company, or

(i) in the case of any royalty or other sum in respect of the user of a patent, the payment is in respect of capital expenditure, and

(ii) in any other case, the payment is charged to capital,

or”,

and

(d) in Schedule 17A—

(i) in paragraph 2—

(I) in subparagraph (2) by substituting the following for clauses (b) and (c):

“(b) Notwithstanding clause (a), an amount (in this subparagraph referred to as the ‘relevant amount’) which is treated under clause (a) as a trading receipt for an accounting period (in this clause referred to as the ‘relevant accounting period’) shall not be taken into account in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for that accounting period but instead, subject to clause (c), a part of the relevant amount shall be so taken into account for each accounting period falling wholly or partly into the period of 5 years beginning at the commencement of the relevant accounting period. The part of the relevant amount to be so taken into account for any such accounting period shall be such amount as bears to the relevant amount the same proportion as the length of the accounting period, or the part of the accounting period falling into the period of 5 years, bears to 5 years.

(c) Where any accounting period referred to in clause (b) is the last accounting period in which a company carried on a trade or profession, then such part of the relevant amount shall be taken into account for that accounting period as is required to ensure that the whole of that amount is accounted for.”,

(II) in subparagraph (3), by substituting the following for clauses (b) and (c):

“(b) Notwithstanding clause (a), an amount (in this subparagraph referred to as the ‘relevant amount’) which is treated under clause (a) as a deductible trading expense for an accounting period (in this clause referred to as the ‘relevant accounting period’) shall not be taken into account in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for that accounting period but instead, subject to clause (c), a part of the relevant amount shall be so taken into account for each accounting period falling wholly or partly into the period of 5 years beginning at the commencement of the relevant accounting period. The part of the relevant amount to be so taken into account for any such accounting period shall be such amount as bears to the relevant amount the same proportion as the length of the accounting period, or the part of the accounting period falling into the period of 5 years, bears to 5 years.

(c) Where any accounting period referred to in clause (b) is the last accounting period in which a company carried on a trade or profession, then such part of the relevant amount shall be taken into account for that accounting period as is required to ensure that the whole of that amount is accounted for.”,

and

(III) in subparagraph (4), by substituting “paragraph 3 or 4” for “paragraph 4”,

(ii) in paragraph 3 by adding the following after subparagraph (3):

“(4) A debt shall not be taken into account for the purposes of paragraph 4 if it may be taken into account for the purposes of this paragraph.”,

(iii) in paragraph 4—

(I) in subparagraph (2), by substituting the following for clauses (b) and (c):

“(b) Notwithstanding clause (a), an amount (in this subparagraph referred to as the ‘relevant amount’) which is treated under clause (a) as a trading receipt for an accounting period (in this clause referred to as the ‘relevant accounting period’) shall not be taken into account in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for that accounting period but instead, subject to clause (c), a part of the relevant amount shall be so taken into account for each accounting period falling wholly or partly into the period of 5 years beginning at the commencement of the relevant accounting period. The part of the relevant amount to be so taken into account for any such accounting period shall be such amount as bears to the relevant amount the same proportion as the length of the accounting period, or the part of the accounting period falling into the period of 5 years, bears to 5 years.

(c) Where any accounting period referred to in clause (b) is the last accounting period in which a company carried on a trade or profession, then such part of the relevant amount shall be taken into account for that accounting period as is required to ensure that the whole of that amount is accounted for.”,

(II) in subparagraph (3), by substituting the following for clauses (b) and (c):

“(b) Notwithstanding clause (a), an amount (in this subparagraph referred to as the ‘relevant amount’) which is treated under clause (a) as a deductible trading expense for an accounting period (in this clause referred to as the ‘relevant accounting period’) shall not be taken into account in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for that accounting period, but instead, subject to clause (c), a part of the relevant amount shall be so taken into account for each accounting period falling wholly or partly into the period of 5 years beginning at the commencement of the relevant accounting period. The part of the relevant amount to be so taken into account for any such accounting period shall be such amount as bears to the relevant amount the same proportion as the length of the accounting period, or the part of the accounting period falling into the period of 5 years, bears to 5 years.

(c) Where any accounting period referred to in clause (b) is the last accounting period in which a company carried on a trade or profession, then such part of the relevant amount shall be taken into account for that accounting period as is required to ensure that the whole of that amount is accounted for.”,

(III) by substituting the following for subparagraph (5):

“(5) A loss to which this subparagraph applies (in this subparagraph referred to as the ‘relevant loss’), which would otherwise be taken into account in computing profits or gains or losses of a company for the purposes of Case I or II of Schedule D for an accounting period (in this subparagraph referred to as the ‘relevant accounting period’), shall not be so taken into account but instead—

(a) (i) a part of the relevant loss shall be so taken into account for each accounting period falling wholly or partly into the period of 5 years beginning at the commencement of the relevant accounting period, and

(ii) the part of the relevant loss to be so taken into account for any such accounting period to which this clause applies shall be such amount as bears to the relevant loss the same proportion as the length of the accounting period, or the part of the accounting period falling into the period of 5 years, bears to 5 years,

and

(b) notwithstanding clause (a), where any accounting period referred to in that clause is the last accounting period in which a company carried on a trade or profession, then such part, of the amount referred to in that clause, shall be taken into account for that accounting period as is required to ensure that the whole of that amount is accounted for.”,

and

(IV) in subparagraph (6) by substituting “first, second and third accounting periods” for “first accounting period”.

(2) This section shall be deemed to have applied as respects any period of account beginning on or after 1 January 2005.

62 .— (1) The Principal Act is amended by inserting the following after section 79A:

“79B.— (1) (a) In this section—

‘ foreign currency asset’ , in relation to a company, means an asset of the company—

(i) the consideration for the acquisition of which consisted solely of an amount denominated in a currency other than the currency of the State, and

(ii) any gain on the disposal of which would be taken into account in computing income of the company chargeable to tax under Case I of Schedule D;

‘ relevant foreign currency liability’ , in relation to a company, means a liability, not being a relevant monetary item (within the meaning of section 79) which arises from a sum subscribed for paid-up redeemable share capital of the company which is denominated in a currency other than the currency of the State;

‘ rate of exchange’ has the meaning assigned to it by section 79.

(b) For the purposes of this section—

(i) where at any time a company disposes of a foreign currency asset which has been matched with a corresponding relevant foreign currency liability and the company does not discharge the liability at that time, the company shall be deemed to discharge the liability, and to incur a new liability equal to the amount of the liability, at that time,

(ii) where in accordance with subsection (2) a company specifies that a foreign currency asset acquired by it at any time is to be matched with a corresponding relevant foreign currency liability incurred by it before that time, the company shall be deemed to discharge the foreign currency liability, and to incur a new liability equal to the amount of the liability, at that time, and

(iii) the amount of a gain or loss on the discharge of a relevant foreign currency liability shall be the amount which would be the gain accruing to, or as the case may be the loss incurred by, the company on the disposal of an asset acquired by it at the time the liability was incurred and disposed of at the time at which the liability was discharged if—

(I) the amount given by the company to discharge the liability was the amount given by the company as consideration for the acquisition of the asset, and

(II) the amount of the liability incurred by the company was the consideration received by the company on the disposal of the asset.

(2) (a) A company may, by giving notice in writing to the inspector, specify that a foreign currency asset denominated in a currency other than the currency of the State shall be matched with such corresponding relevant foreign currency liability denominated in that currency as is specified by the company.

(b) A notice under paragraph (a) shall be given within 3 weeks after the acquisition by the company concerned of the foreign currency asset.

(3) Where in an accounting period a company disposes of a foreign currency asset which has been matched by the company under subsection (2) with a relevant foreign currency liability of the company, then any gain or loss, whether realised or unrealised, on the relevant foreign currency liability shall be taken into account in computing the trading income of the company.”.

63 .— Schedule 24 to the Principal Act is amended—

(a) in paragraph 4 by inserting the following after subparagraph (2):

“(2A) For the purposes of subparagraph (2) but subject to subparagraph (3), where credit is to be allowed against corporation tax for foreign tax in respect of any income of a company (in this subparagraph referred to as ‘that income’), being income which is taken into account in computing the profits or gains of a trade carried on by the company in an accounting period, the relevant income shall be so much of the profits or gains of the trade for that accounting period as is determined by the formula—

P x I

R

where—

P is the amount of the profits or gains of the trade for the accounting period before deducting any amount under paragraph 7(3)(c),

I is the amount of that income for the accounting period before deducting any disbursements or expenses of the trade, and

R is the total amount receivable by the company in the carrying on of the trade in the accounting period.”,

(b) in subparagraph (2) of paragraph 9B, by substituting “a relevant company” for “an Irish company”,

(c) by inserting the following after paragraph 9E:

“9F (1) (a) In this paragraph—

the ‘aggregate amount of corporation tax payable by a company for an accounting period in respect of relevant interest of the company for the accounting period from foreign companies’ means so much of the corporation tax which, apart from this paragraph, would be payable by the company for that accounting period as would not have been payable had the interest not been chargeable to tax;

‘foreign company’ means a company resident outside the State;

‘foreign tax’, in relation to interest receivable by a company, means tax which—

(i) under the laws of any foreign territory has been deducted from the amount of the interest,

(ii) corresponds to income or corporation tax,

(iii) has not been repaid to the company;

‘unrelieved foreign tax’ has the meaning assigned to it in subparagraph (2).

(b) For the purposes of this paragraph—

(i) interest which is receivable by a company (in this clause referred to as the ‘receiving company’) from a company is relevant interest if—

(I) the interest falls to be taken into account in computing the trading income of a trade carried on by the receiving company,

(II) the interest arises from a source within a territory in regard to which arrangements have the force of law, and

(III) one of those companies is the 25 per cent subsidiary of the other or both companies are 25 per cent subsidiaries of a third company,

(ii) subject to subclause (iii), a company shall be deemed to be a 25 per cent subsidiary of another company if and so long as not less then 25 per cent of its ordinary share capital would be treated as owned directly or indirectly by that other company if section 9 (other than subsection (1) of that section) were to apply for the purposes of this paragraph,

(iii) a company (in this subclause referred to as a ‘subsidiary company’) shall not be deemed to be a 25 per cent subsidiary of another company (in this subclause referred to as the ‘parent company’) at any time if the percentage—

(I) of any profits, which are available for distribution to equity holders, of the subsidiary company at such time to which the parent company is beneficially entitled at such time, or

(II) of any assets, which are available for distribution to equity holders on a winding up, of the subsidiary company at such time to which the parent company would be beneficially entitled at such time on a winding up of the subsidiary company,

is less than 25 per cent of such profits or assets (as the case may be) of the subsidiary company at such time, and sections 413, 414, 415 and 418 shall, with any necessary modifications but without regards to section 411(1)(c) in so far as it relates to those sections, apply to the determination of the percentage of those profits or assets (as the case may be) to which a company is beneficially entitled as they apply to the determination for the purposes of Chapter 5 of Part 12 of the percentage of any such profits or assets to which a company is so entitled.

(2) Where, as respects any relevant interest received in an accounting period by a company, any part of the foreign tax cannot, apart from this paragraph, be allowed as a credit against corporation tax and, accordingly, the amount of income representing the interest is treated under paragraph 7(3)(c) as reduced by that part of the foreign tax, then an amount determined by the formula—

100 — R x D

100

where—

R is the rate per cent specified in section 21(1), and

D is the amount of the part of the foreign tax by which the income is to be treated under paragraph 7(3)(c) as reduced,

shall be treated for the purposes of subparagraph (3) as unrelieved foreign tax of that accounting period.

(3) The aggregate amount of corporation tax payable by a company for an accounting period in respect of relevant interest of the company for the accounting period from foreign companies shall be reduced by the unrelieved foreign tax of that accounting period.”,

and

(d) by inserting the following after paragraph 9F (inserted by paragraph (c)):

“Dividends paid by companies that are taxed as a group under the law of a territory outside the State

9G (1) This paragraph applies in any case where—

(a) under the law of a territory outside the State, tax is payable by a company (in this paragraph referred to as the ‘responsible company’) resident in that territory in respect of the aggregate profits, or aggregate profits and aggregate gains, of that company and one or more other companies (in this paragraph referred to as the ‘consolidated companies’), taken together as a single taxable entity, and

(b) a dividend is paid—

(i) by any one of the consolidated companies (in this paragraph referred to as the ‘paying company’) to a company that is not one of the consolidated companies (in this paragraph referred to as the ‘recipient company’), or

(ii) by a company that is not one of the consolidated companies (in this paragraphreferred to as the ‘third company’) to any one of the consolidated companies.

(2) (a) Where this paragraph applies, then for the purposes of allowing credit under this Schedule for foreign tax in respect of profits attributable to dividends this Schedule shall apply with any necessary modifications as if—

(i) the consolidated companies, taken together, were a single company (in this paragraph referred to as the ‘single company’),

(ii) any dividend paid by any of the consolidated companies to a recipient company was paid by the single company,

(iii) any dividend paid by a third company to any one of the consolidated companies was paid to the single company,

(iv) the single company is related to the recipient company if the paying company is related to the recipient company,

(v) the third company is related to the single company if the third company is related to that one of the consolidated companies to which it paid the dividend, and

(vi) the single company is resident in the territory in which the responsible company is resident,

so that the relevant profits for the purposes of paragraph 8 is a single aggregate figure in respect of the single company and the foreign tax paid by the responsible company is foreign tax paid by the single company.

(b) For the purposes of this paragraph—

(i) a single company that is treated as paying a dividend shall be treated as connected with a relevant company (within the meaning given to it in paragraph 9B) in relation to the dividend if the company that paid the dividend is connected with that relevant company,

(ii) a relevant dividend (within the meaning given to it in paragraph 9A) paid by any one of the consolidated companies to a recipient company will be treated as a relevant dividend paid by the single company to that recipient company,

(iii) references in paragraph 8 to ‘body corporate’ shall include references to a single company within the meaning of this paragraph.”.

64 .— (1) Section 626B of the Principal Act is amended in subsection (3)—

(a) in paragraph (d) by substituting “section 29(3),” for “section 29(3).”, and

(b) by inserting the following after paragraph (d):

“(e) to deemed disposals under section 627.”.

(2) This section applies to deemed disposals on or after 2 February 2006.

65 .— (1) Section 247 of the Principal Act is amended—

(a) in subsection (1)(b) by inserting “, except for the purposes of subsection (4A),” after “section 10 and”, and

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

“(4A) (a) Subject to the following paragraphs of this subsection, subsection (2) shall not apply to a loan to the investing company to defray money applied—

(i) in acquiring any part of the ordinary share capital of, or

(ii) in lending to a company money which is used directly or indirectly for the purposes of acquiring any part of the capital of,

a company (from such company or another company, being in either case a company which, at the time of the acquiring of the capital or immediately after that time, was connected with the investing company) if the loan is made to the investing company by a person who is connected with the investing company.

(b) Where, as a part of, or in connection with, any scheme or arrangement for the making of a loan to the investing company by a person (in this paragraph referred to as the ‘first-mentioned person’) who is not connected with the investing company, another person who is connected with the investing company directly or indirectly makes a loan to, a deposit with, or otherwise provides funds to the first-mentioned person or to a person who is connected with the first-mentioned person, then the loan made to the investing company shall be treated for the purposes of paragraph (a) as being a loan made to the investing company by a person with whom it is connected.

(c) Paragraph (a) shall not apply to interest on a loan (in this paragraph referred to as the ‘original loan’) made to a company if—

(i) the original loan is used to defray money applied—

(I) in acquiring ordinary share capital of another company on the issue of the share capital by the other company, or

(II) in lending to a company money which is used directly or indirectly for the purposes of acquiring ordinary share capital of another company on the issue of the share capital by the other company,

and

(ii) the share capital is issued for the purposes of increasing the aggregate of the capital available to the other company for the use by the other company wholly and exclusively for the purposes of its trade or business and not as part of any arrangement or understanding, entered into in connection with the original loan, the purpose or one of the purposes of which is to provide moneys, directly or indirectly—

(I) to the person (referred to in clause (II) as the ‘original lender’) who made the original loan and to thereby achieve directly or indirectly the effective repayment of the original loan or the greater part of it, or

(II) to another person who is connected with the original lender and to thereby achieve a provision of moneys that is, notwithstanding that the moneys are being provided (as part of the arrangement or understanding) to a person other than the original lender, equivalent to the achievement directly or indirectly of the effective repayment, referred to in clause (I), of the original loan or the greater part of it,

at a time before interest ceased to be payable by the investing company in respect of the original loan or such greater part of it.

(d) Where the use, whether direct use (in this paragraph referred to as the ‘direct use’) by the investing company or subsequent indirect use (in this paragraph referred to as the ‘indirect use’) through another company as investee or borrower or through a sequence of companies acting, in turn, as investees or borrowers, of a loan (in this paragraph and paragraph (e) referred to as the ‘original loan’) received by an investing company involves lending or acquisition of shares so that such use results in—

(i) interest (which is not deductible in computing income or profits under any provision of the Corporation Tax Acts by the investing company or any company connected with it) being received in, or being receivable in respect of, an accounting period, so as to be income, or as the case may be an amount credited in computing income, chargeable to corporation tax for that period, or

(ii) dividends or other distributions chargeable to corporation tax being received in an accounting period,

and the interest mentioned in subparagraph (i) is, or the dividends or distributions mentioned in subparagraph (ii) are, income of the investing company or a company connected with the investing company, being income which would not have arisen but for the direct use or indirect use of the original loan, then that income shall be relevant income for the purposes of paragraph (e) and shall be referred to in that paragraph as ‘relevant income’.

(e) If relief for interest paid (in this paragraph referred to as the ‘relevant interest’) by the investing company in an accounting period (in this paragraph referred to as the ‘relevant accounting period’) in respect of the original loan would, apart from this paragraph, be denied by virtue of paragraph (a), relief shall not be denied in respect of so much of the relevant interest as does not exceed the relevant income of the investing company for the relevant accounting period and where—

(i) the relevant interest exceeds the relevant income of the investing company for the relevant accounting period, by an amount referred to in this paragraph as the ‘relevant excess’,

(ii) apart from relief by virtue of an election under subparagraph (iii), relief could not be claimed under the Corporation Tax Acts in respect of the relevant interest represented by the relevant excess,

(iii) the investing company and a company (in this paragraph referred to as the ‘electing company’) connected with it jointly so elect and notify the inspector of that election in such form as the Revenue Commissioners may require, and

(iv) the aggregate value of relevant interest that may be deducted by virtue of elections under subparagraph (iii), by one or more companies other than the investing company, does not exceed the relevant excess,

then so much of the relevant interest represented by the relevant excess may be deducted from the total profits, reduced by any other relief from corporation tax, of the electing company, for the accounting period (in this paragraph referred to as the ‘second-mentioned period’) for which the relevant income of the electing company is chargeable to corporation tax, as does not exceed the lesser of—

(I) the part of the relevant income of the electing company for the second-mentioned period which may be apportioned to the relevant accounting period (by reference to the proportion which the length of the period common to the relevant accounting period and the second-mentioned accounting period bears to the length of the second-mentioned accounting period), and

(II) the amount by which such part of that relevant income of the electing company exceeds the aggregate of any amounts, being—

(A) amounts of any relief, which is referable to the second-mentioned period, surrendered at any time by the electing company under Chapter 5 of Part 12, or

(B) amounts, which are not amounts referred to in clause (A), of any losses which could have been set off under section 396(2) against profits of the second-mentioned period but which were not set off against those profits,

but relief, for interest paid by the investing company, which has been allowed by virtue of this paragraph shall be deemed for the purposes mentioned in Paragraph 4(5) of Schedule 24 to the Principal Act to have been allocated by the company concerned to the relevant income of the company by reference to which the relief for the interest was allowed, and the foreign tax in respect of that relevant income shall be disregarded for the purposes of paragraph 9E and 9F of Schedule 24.

(f) Where, as a part of, or in connection with, any scheme or arrangement for the making of a loan to any company (in this paragraph referred to as the ‘borrower’), which is connected with the investing company, by a person (in this paragraph referred to as the ‘first-mentioned person’) who is not connected with the investing company, another person who is connected with the investing company directly or indirectly makes a loan to, a deposit with, or otherwise provides funds to the first-mentioned person or to a person who is connected with the first-mentioned person, then interest payable by the first-mentioned person to the other person in respect of the loan, deposit or other funds shall be treated for the purposes of paragraph (d)(i) as interest which is deductible in computing income or profits under provisions of the Corporation Tax Acts by the investing company or a company connected with it.

(g) For the purposes of paragraph (e), ‘relevant income’ of a company shall be increased or reduced by any amount of profit or gain or, as the case may be, loss directly related to that income or to the source of that income which is an amount arising—

(i) by virtue of a change in a rate of exchange (within the meaning of section 79), or

(ii) from any contract entered into by the company for the purpose of eliminating or reducing the risk of loss being incurred by the company due to a change in a rate of exchange (within the meaning of section 79) or in a rate of interest.

(h) For the purposes of paragraph (c), share capital shall not be treated as issued by a company as part of an arrangement or understanding of a type described in that paragraph, entered into in connection with an original loan (within the meaning of that paragraph), solely because that share capital is used directly or indirectly in paying off, to the person who made the original loan (within that meaning) or to a person connected with that person, a loan, advance or debt (in this paragraph referred to as the ‘other loan’) other than the original loan where—

(i) the other loan was used wholly and exclusively for the purposes of a trade or business of the company and not as part of any arrangement or understanding, entered into in connection with the other loan, the purpose or one of the purposes of which was to provide moneys, directly or indirectly—

(I) to a person (referred to in clause (II) as the ‘original lender’) who made, or directly or indirectly funded, the other loan and to thereby achieve directly or indirectly the effective repayment of the other loan or the greater part of it, or

(II) to another person who is connected with the original lender and to thereby achieve a provision of moneys that is, notwithstanding that the moneys are being provided (as part of the arrangement or understanding) to a person other than the original lender, equivalent to the achievement directly or indirectly of the effective repayment, referred to in clause (I), of the other loan or the greater part of it,

at a time before interest ceased to be payable by the company in respect of the other loan or such greater part of it, and

(ii) interest on the other loan, if that other loan had been made on or after 2 February 2006, would have been deductible in computing profits, or any description of profits, for the purposes of corporation tax—

(I) if the other loan had not been paid off, and

(II) on the assumption, if the other loan was free of interest, that it carried interest.”.

(2) This section applies as respects a loan made on or after 2 February 2006.

66 .— (1) Section 766 of the Principal Act is amended—

(a) in subsection (1)(a)—

(i) by inserting the following after the definition of “appropriate inspector”:

“ ‘authorised officer’ means an officer of the Revenue Commissioners authorised by them in writing for the purposes of this section;”,

and

(ii) in the definition of “expenditure on research and development” by inserting “wholly and exclusively” after “incurred by the company”,

(b) by inserting the following after subsection (1):

“(1A) (a) Where expenditure is incurred by a company on machinery or plant which qualifies for any allowance under Part 9 or this Chapter and the machinery or plant will not be used by the company wholly and exclusively for the purposes of research and development, the amount of the expenditure attributable to research and development shall be such portion of that expenditure as appears to the inspector (or on appeal the Appeal Commissioners) to be just and reasonable, and such portion of the expenditure shall be treated for the purposesof subsection (1)(a) as incurred by the company wholly and exclusively in carrying on research and development activities.

(b) Where, at any time, the apportionment made under paragraph (a), or a further apportionment made under this paragraph, ceases to be just and reasonable, then—

(i) such further apportionment shall be made at that time as appears to the inspector (or on appeal the Appeal Commissioners) to be just and reasonable,

(ii) any such further apportionment shall supersede any earlier apportionment, and

(iii) any such adjustments, assessments or repayments of tax shall be made as are necessary to give effect to any apportionment under this subsection.”,

and

(c) by inserting the following after subsection (6):

“(7) (a) The Revenue Commissioners may in relation to a claim by a company under this section or section 766A—

(i) consult with any person who in their opinion may be of assistance to them in ascertaining whether the expenditure incurred by the company was incurred in the carrying on by it of research and development activities, and

(ii) notwithstanding any obligation as to secrecy or other restriction on the disclosure of information imposed by, or under, the Tax Acts or any other statute or otherwise, but subject to paragraph (b), disclose any detail in the company’s claim under this section, or under section 766A, which they consider necessary for the purposes of such consultation.

(b) (i) Before disclosing information to any person under paragraph (a), the Revenue Commissioners shall make known to the company—

(I) the identity of the person who they intend to consult, and

(II) the information they intend to disclose to the person.

(ii) Where the company shows to the satisfaction of the Revenue Commissioners (or on appeal to the Appeal Commissioners) that disclosure of such information to that person could prejudice the company’s business, then the Revenue Commissioners shall not make such disclosure.

(8) Any functions which are authorised by subsection (7) to be performed or discharged by the Revenue Commissioners may be performed or discharged by an authorised officer and any references in subsection (7) to the Revenue Commissioners shall, with any necessary modifications, be construed as including references to the authorised officer.”.

(2) This section applies for accounting periods ending on or after 2 February 2006.

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

(a) in section 697A(1)—

(i) in the definition of “qualifying ship”, by substituting the following for paragraph (b):

“(b) a vessel, other than a vessel operated for bona fide commercial purposes and with an overnight passenger capacity (not including crew) of not less than 50 persons, of a kind whose primary use is for the purposes of sport or recreation,”,

and

(ii) by deleting the definition of “75 per cent limit”,

(b) in section 697D(3), by substituting “section 697F” for “section 697E and 697F”,

(c) by deleting section 697E,

(d) in section 697G, by substituting “section 697F” for “section 697E or 697F”,

(e) in section 697H(1), by deleting paragraph (c), and

(f) in Schedule 18B—

(i) by substituting the following for paragraph 1:

“Method of making and giving effect to an election

1. (1) A tonnage tax election shall be made by notice to the Revenue Commissioners and shall be made by means of a form prescribed for that purpose by them.

(2) (a) The notice shall be supported by such information, particulars and documentation (in this paragraph referred to as ‘information’) as the Revenue Commissioners may require for the purposes of this Part and the election shall not take effect until such information is provided to the satisfaction of the Revenue Commissioners.

(b) Without prejudice to the generality of this subparagraph, the information referred to in clause (a) may include information relating to the matters specified in subparagraph (3).

(3) (a) The information which may be requested from an applicant company by the Revenue Commissioners for the purposes of subparagraph (2) includes—

(i) documentation on legal status, memorandum and articles of association, and certificate of incorporation of the company,

(ii) business plans or similar documents of the company,

(iii) the name and address of each of the directors of the company,

(iv) the name and address of each of the beneficial shareholders of the company and the number and class of shares held by each,

(v) details of the qualifying ships owned or leased by the company,

(vi) particulars of how the strategic and commercial management of the qualifying ships is carried on by the company in the State,

(vii) in the case of a group election, particulars of all the companies in the group, their respective shareholdings, and the flow of funds between all of the companies in the group.

(b) For the purposes of this subparagraph, ‘applicant company’ means a company that makes an election by notice to the Revenue Commissioners in accordance with subparagraph (1).”,

and

(ii) in subparagraph (6) of paragraph 3, by substituting “A tonnage tax election” for “Subject to section 697E(4), a tonnage tax election”.

(2) (a) Paragraph (a)(i) of subsection (1) comes into operation on 2 February 2006.

(b) Paragraph (f)(i) of subsection (1) comes into operation on 1 July 2006.

(c) Paragraphs (a)(ii), (b), (c), (d), (e) and (f)(ii) of subsection (1) come into operation on such day or days as the Minister for Finance may by order or orders appoint and different days may be appointed for different purposes or different provisions.

68 .— (1) Chapter 4 of Part 12 of the Principal Act is amended—

(a) in section 403—

(i) in subsection (1) by inserting the following after paragraph (c):

“(d) For the purposes of this section, where, in relation to a company which carries on a business—

(i) the activities—

(I) of the company,

(II) of the company and all companies of which it is a 75 per cent subsidiary (within the meaning of section 9) and all companies which are its 75 per cent subsidiaries (within the same meaning), or

(III) of the company and all companies (being companies which, by virtue of the law of the territory in which the company is resident for the purposes of tax, are so resident in that territory; and for this purpose, ‘tax’, in relation to such a territory, means any tax imposed in the territory which corresponds to corporation tax in the State) of which it is a 75 per cent subsidiary (within the meaning of section 9) or which are its 75 per cent subsidiaries (within the same meaning),

consist wholly or mainly of the leasing of machinery or plant, and

(ii) not less than 90 per cent of the activities of the company consist of one or more of the following:

(I) the leasing of machinery or plant;

(II) the provision of finance and guarantees to fund the purchase of machinery or plant of a type which is similar to the type of machinery or plant leased by the companies referred to in subparagraph (i);

(III) the provision of leasing expertise in connection with machinery or plant of a type which is similar to the type of machinery or plant leased by the companies referred to in subparagraph (i);

(IV) the disposal of machinery or plant acquired by the company in the course of its leasing trade;

(V) activities which are ancillary to the activities referred to in clauses (I) to (IV):

then, subject to section 80A(2)(c), income from the company’s trade of leasing shall be treated as including—

(A) income from the activities referred to in subparagraph (ii), and

(B) chargeable gains on the disposal of machinery or plant acquired by the company in the course of its leasing trade; and for this purpose the amount of such a gain shall be computed without regard to any adjustment made under section 556(2).”,

and

(ii) in subsection (7) by inserting “(not being either or both a film negative and its associated soundtrack, or a film tape or a film disc)” after “are references to machinery or plant”,

(b) in section 404—

(i) in subsection (1)(b)—

(I) by deleting “and” at the end of subparagraph (iii),

(II) in subparagraph (iv) by substituting “shall be treated as if they were separate accounting periods,” for “shall be treated as if they were separate accounting periods, and”, and

(III) by inserting the following after subparagraph (iv):

“(v) where a lease the relevant lease payments in relation to which are denominated in a currency (in this subparagraph referred to as the ‘relevant currency’) other than the currency of the State—

(I) is a relevant lease, and

(II) would not be a relevant lease if subparagraphs (i) to (iv) were applied by reference to the value of those relevant lease payments in the relevant currency,

the lease shall not be treated as a relevant lease.”,

(ii) in subsection (2) by substituting “Subject to subsection (2A), where” for “Where”, and

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

“(2A) (a) In this subsection—

‘relevant long-term lease’ means a lease of an asset the predictable useful life of which exceeds 8 years;

‘predictable useful life’ and ‘relevant period’ have, respectively, the same meanings as they have in section 80A.

(b) Where—

(i) in the course of a trade an asset is provided by a person for leasing under a relevant lease, and

(ii) the lease is a relevant long-term lease,

then this section shall apply as if—

(I) in subsection (2)(a) “and the letting of any other asset under a relevant long-term lease” were inserted after “under that relevant lease”, and

(II) the following were substituted for subparagraphs (i) and (ii) of section 403(4)(a):

‘(i) for relief under section 396(2), except to the extent that it can be set off under that section against—

(I) the company’s income from the trade of leasing,

(II) in the case of a company referred to in paragraph (d) of section 403(1), income specified in subparagraph (A) and (B) of that paragraph, or

(III) income from the leasing by the company of any other asset under a relevant long-term lease,

or

(ii) to be surrendered by means of group relief except to the extent that it—

(I) could be set off under section 420A against income of a trade of leasing carried on by the claimant company if paragraph (b) of the definition of relevant trading loss in section 420A were deleted, or

(II) where the surrendering company and the claimant company are companies referred to in paragraph (d) of section 403(1), can be set off—

(A) under section 420A against income specified in subparagraphs (A) and (B) of that paragraph, or

(B) under section 420A against income from the leasing by the company of any other asset under a relevant long-term lease.’,”,

(iv) in subsection (4)(a) by substituting “Subject to subsection (4A), where at any time” for “Where at any time”, and

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

“(4A) (a) Where the terms of a lease entered into before 2 February 2006, being a lease which would, apart from subsection (1)(b)(ii) or subsection (6)(a), have been a relevant lease, are altered after that day, then—

(i) such a lease shall not be treated as a relevant lease by virtue of that alteration, and

(ii) unless the alteration involves a reduction in the value of any payment (or a part of a payment) under the lease, not being a payment (or a part of a payment) the amount of which is computed under the lease by reference to any rate of interest, the alteration shall be disregarded as respects the treatment for tax purposes of any defeasance payment made in connection with the lease.

(b) Paragraph (a) shall not apply as respects a lease if any amount payable under the lease is, by virtue of the alteration of the terms of the lease, to be paid under the lease more than 20 years after the time at which it would otherwise have been payable.”,

(vi) by substituting the following for subsection (6):

“(6) (a) This section shall apply as on and from 23 December 1993; but a lease of an asset shall not be a relevant lease if—

(i) a binding contract in writing for the letting of the asset was concluded before that day, or

(ii) (I) the relevant period does not exceed 5 years,

(II) the predictable useful life of the asset does not exceed 8 years,

(III) the lease provides for lease payments to be made at annual or more frequent regular intervals throughout the relevant period such that, in relation to any chargeable period (in this subsection referred to as the ‘current chargeable period’) falling wholly or partly into the relevant period (other than the earliest such chargeable period), the aggregate of the amounts of lease payments payable under the lease before the end of the current chargeable period is not less than an amount determined by the formula—

V x T

2920

where—

V is an amount equal to the fair value of the asset at the inception of the lease, and

T is the number of days in the period commencing at the inception of the lease and ending at the end of the current chargeable period,

and

(IV) the lessor has made an election in relation to the lease for the treatment referred to in paragraph (b).

(b) Where a lessor has made an election under paragraph (a)(ii)(IV) in relation to a lease, the Tax Acts shall apply as respects assets leased under that lease as they would if the following were inserted in section 284(2):

‘(c) Where machinery or plant which is used in a chargeable period or its basis period is not used throughout that period, the amount of the wear and tear allowance for the chargeable period in respect of the machinery or plant, computed by reference to paragraph (b), shall be reduced to so much as bears to that amount the same proportion as the part of the chargeable period or its basis period throughout which the machinery or plant is used bears to the length of the chargeable period or its basis period.’.”.

(2) (a) Subject to paragraph (b) this section applies to accounting periods ending on or after 1 January 2006.

(b) Subsection (1)(a)(ii) applies from 2 February 2006.

69 .— (1) Schedule 4 to the Principal Act is amended—

(a) by inserting the following after paragraph 18:

“18A. The Courts Service.”,

(b) by inserting the following after paragraph 55:

“55A. The Irish Auditing and Accounting Supervisory Authority.”,

(c) by substituting “7. The National Tourism Development Authority.” for paragraph 7,

(d) by substituting “26. The Health Service Executive.” for paragraph 26, and

(e) by deleting paragraphs 46 and 49.

(2) (a) Subsection (1)(c) is deemed to have come into force and have taken effect as on and from 28 May 2003.

(b) Subsection (1)(d) is deemed to have come into force and have taken effect as on and from 1 January 2005.

³OJ No. L294, 10.11.2001, p.1

⁴OJ No. L207, 18.8.2003, p.1

⁵OJ No. L294, 10.11.2001, p.1

⁶OJ No. L207, 18.8.2003, p.1