Finance Act, 1993

Tax treatment of foreign trusts.

49.—(1) (a) In this section—

“beneficiary”, in relation to a trust, means any person who, directly or indirectly, is beneficially entitled, or may through the exercise of any power or powers conferred on any person or persons become so beneficially entitled, under the trust to income or capital or to have any income or capital applied for his benefit or to receive any other benefit;

“relevant person” means a person who—

(i) (I) is a trustee under a unit trust scheme which is, or is deemed to be, an authorised unit trust scheme within the meaning of the Unit Trusts Act, 1990 , and which has not had its authorisation under that Act revoked,

(II) is a trustee of any other undertaking which is an undertaking for collective investment in transferable securities within the meaning of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 1989 ( S.I. No. 78 of 1989 ), being an undertaking which holds an authorisation issued pursuant to the said Regulations and that authorisation has not been revoked,

(III) in the opinion of the Central Bank of Ireland, is an appropriate person to be a trustee (being a trustee to whom subparagraph (I) or (II) of this definition relates), or

(IV) is a holder of a licence granted under section 9 of the Central Bank Act, 1971 , or is otherwise exempt from holding a licence by virtue of Regulation 11 of the European Communities (Licensing and Supervision of Credit Institutions) Regulations, 1992 ( S.I. No. 395 of 1992 ),

(ii) is authorised, under any enactment which provides for such authorisation, by the Central Bank of Ireland to engage in the management of trusts in the course of its business,

(iii) carries on a business in the State which consists of or includes such management of trusts, and

(iv) is, in the course of that business, involved in the management of the trusts;

“settlor”, in relation to a trust, includes any person who has provided or undertaken to provide assets or income directly or indirectly for the purposes of the trust;

“trust” means any trust established by deed entered into by one or more than one settlor, or any trust arising under a testamentary disposition, whereby—

(i) assets, which may or may not change from time to time in the course of the management of the trust, or

(ii) income, the sources and nature of which may or may not also so change from time to time,

beneficially owned by the settlor or settlors are or is vested in a person or persons (in this section referred to as the “trustee” or “trustees”) to be—

(I) either or both held and managed for,

(II) paid over to, or

(III) applied for,

the benefit of any beneficiary or beneficiaries.

(b) For the purposes of this section—

(i) a trust shall, at any time, be a “foreign trust” where at that time it is established to the satisfaction of—

(I) the inspector concerned with whether or not any tax or duty applies, or

(II) such other officer of the Revenue Commissioners as is so concerned,

in relation to the trust or to any person who in relation to the trust is a settlor, a trustee or a beneficiary, that all of the following conditions are satisfied at that time with respect to the trust—

(A) no person who is a settlor was at the time the trust was created (or in the case of a trust arising under a testamentary disposition, at the time of his death) domiciled, resident or ordinarily resident in the State,

(B) all of the assets of the trust are situated outside the State,

(C) all of the income of the trust arises from sources situated outside the State,

(D) none of the persons who at that time are or may be beneficiaries in relation to the trust is domiciled, resident or ordinarily resident in the State, and

(E) none of the persons who are trustees in relation to the trust is resident or ordinarily resident in the State:

Provided that, notwithstanding anything in the terms of the trust or in any of the foregoing provisions of this subparagraph, a person shall not for the purposes of this clause be regarded as a trustee in relation to a trust if that person is a relevant person, and

(ii) section 48 of the Capital Gains Tax Act, 1975 , shall apply for the purposes of determining the situation of assets.

(2) Notwithstanding anything in the Income Tax Acts, for the purposes of those Acts the income of a foreign trust shall not be regarded as the income of any person resident or ordinarily resident in the State.

(3) Notwithstanding anything in the Capital Gains Tax Acts and without prejudice to the proviso to subsection (1) of section 15 of the Capital Gains Tax Act, 1975 , for the purposes of those Acts the assets of a foreign trust shall not be regarded as the assets of any person resident or ordinarily resident in the State.

(4) This section shall not come into effect until such time as legislation governing the regulation of trustees by the Central Bank of Ireland is enacted and shall come into effect subject to such legislation and on such date as the Minister for Finance shall by order appoint.