Corporation Tax Act, 1976

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Computation of payable tax credits where double taxation relief is allowed.

167.—(1) In this section—

“the company” means a company making a distribution;

“distribution” means a distribution in respect of which the recipient is entitled to a tax credit under section 88;

“distributable income” has the meaning given by section 64 (4) (distributions: export sales relief);

“double taxation relief” means any credit for tax payable in any territory outside the State which is allowable against Irish corporation tax by virtue of any international agreement having the force of law, including any such credit which under section 363 of the Income Tax Act, 1967 (treatment of dividends for double taxation relief in certain cases), or this section has been taken into account in relation to any distribution receivable by the company;

“foreign tax” means tax payable in any territory outside the State and in respect of which double taxation relief is allowable;

“foreign income” means income in respect of which foreign tax is payable;

“the reduced Irish tax credit” means the sum calculated under subsection (3).

(2) (a) For the purposes of subsection (3) the amount of relevant tax in respect of any income is an amount determined by the formula

where—

A is the amount of corporation tax which is chargeable in respect of the income,

B is an amount equal to income tax at the standard rate on the amount of the income, such standard rate being the rate for the year of assessment in which the appropriate accounting period ends, and

C is the standard rate per cent. for the year of assessment in which the appropriate accounting period ends.

(b) For the purposes of paragraph (a) the appropriate accounting period means the accounting period for which corporation tax is chargeable in respect of the income.

(c) Notwithstanding paragraph (a) the amount of relevant tax in respect of any amount of franked investment income which by virtue of subsection (4) is deemed to be foreign income shall be taken to be nil.

(3) Where a distribution (being a distribution which is made, or by virtue of subsection (6) is deemed to have been made, for an accounting period) is made wholly or partly out of foreign income, and the foreign tax paid in respect of the income exceeds the amount of relevant tax in respect of that income, any payment of the tax credit in respect of the distribution shall be made as if the said tax credit were a sum calculated by deducting from the amount of the tax credit which apart from this section would apply in respect of the distribution—

(a) where the distribution is equal in amount to the whole of the distributable income—an amount equal to the excess of the foreign tax over the relevant tax in respect of the foreign income, and

(b) where the distribution is less in amount than the whole of the distributable income—an amount which bears to the deduction which would be made if the distribution were equal in amount to the whole of the distributable income the same proportion as the distribution bears to the whole of the distributable income.

(4) Where a distribution is received by the company and the amount of any payment of the tax credit to the company in respect of that distribution would, if a proper claim in that behalf were made, be determined in accordance with this section, then for the purposes of subsection (3)—

(a) the amount of franked investment income which the distribution represents shall be deemed to be foreign income of the accounting period in which the distribution is received, and

(b) the amount by which the tax credit in respect of the distribution exceeds the tax credit which would, if a proper claim in that behalf were made, be payable to the company shall be deemed to be foreign tax paid by the company in respect of that income.

(5) (a) Where, for an accounting period, the company has paid, or, under subsection (4), is deemed for the purposes of subsection (3) to have paid, foreign tax in respect of income from more than one source, the deduction referred to in subsection (3) shall be computed separately in respect of income from each source and the separate amounts as so computed shall be aggregated for the purpose of computing the total amount of the deduction which should be made.

(b) For the purposes of this subsection—

(i) the amount of franked investment income which is represented by each distribution which is received by the company shall be deemed to be income from a separate source, and

(ii) where a company has paid foreign tax in respect of income (not being franked investment income which is deemed under subsection (4) to be foreign income) arising in two or more territories outside the State, the income arising in each such territory shall be deemed to be income from a separate source.

(6) The provisions of subsections (3), (5) and (6) of section 64 (distributions: tax credit and export sales relief) shall apply for the purposes of this section as they apply for the purposes of that section.

(7) Where the income out of which a distribution is made, or is deemed by virtue of subsection (6) to have been made, includes income the income tax on which was reduced by the allowance of double taxation relief or includes dividends to which the provisions of section 363 (2) (a) of the Income Tax Act, 1967 , applied, the tax credit in respect of that distribution shall for the purposes of payment thereof be subject to such adjustment as may be appropriate.

(8) For the purposes of this section all such apportionments as may be necessary shall be made.

(9) Where the reduced Irish tax credit falls to be computed in relation to a distribution, the particulars to be given by the company in the statement required by section 5 (dividend warrants) shall, in addition to the particulars required to be given apart from this section, include particulars of the reduced Irish tax credit.

(10) Where a distribution has been made before the making by the Government of an order to which section 361 (1) of the Income Tax Act, 1967 , relates, and any double taxation relief would have fallen to be taken into account in relation to that distribution if this section had applied thereto, that relief shall be taken into account as far as possible in determining the reduced Irish tax credit in relation to the first distribution made by the company after the making of the order, and any part of that relief which cannot be so taken into account shall as far as possible be taken into account in relation to the next succeeding distribution, and so on.

(11) Where—

(a) the whole or part of an annual payment is made out of income represented by a distribution, and

(b) that distribution is made wholly or partly out of foreign income,

the tax credit in respect of that distribution shall, notwithstanding the provisions of section 88, be an amount equal to the amount which, by virtue of subsection (3) of this section, would be payable in respect of the said tax credit:

Provided that nothing in this subsection shall affect the amount of income which a distribution is treated as representing for the purposes of Schedule F.