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Interest payments to residents in relevant territories.
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40.— (1) The Principal Act is amended in section 198—
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(a) in subsection (1)(a) by substituting the following for the definition of “arrangements”:
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“ ‘arrangements’ means arrangements having the force of law by virtue of section 826(1) or arrangements made with the government of a territory which on completion of the procedures set out in section 826(1) will have the force of law;”,
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(b) in the definition of “ relevant territory ”—
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(i) in paragraph (i) by inserting “or” after “the State,”,
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(ii) in paragraph (ii) by deleting “made, or” and inserting “made;”, and
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(iii) by deleting paragraph (iii),
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(c) in subsection (1)(b)(i) by inserting “and have effect in accordance with the provisions of those arrangements” after “have been made”, and
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(d) by substituting the following for subsection (1)(c)(ii):
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“(ii) a company shall not be chargeable to income tax in respect of interest paid by a relevant person (within the meaning of section 246) in the ordinary course of a trade or business carried on by that person—
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(I) if the company is not resident in the State but is regarded for the purposes of this subsection as being a resident of a relevant territory which imposes a tax that generally applies to interest receivable in that territory by companies from sources outside that territory, or
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(II) where the interest—
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(A) is exempted from the charge to income tax under arrangements made with the government of a territory outside the State having the force of law under the procedures set out in section 826(1), or
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(B) would be exempted from the charge to income tax if arrangements made, on or before the date of payment of the interest, with the government of a territory outside the State, that do not have the force of law under the procedures set out in section 826(1), had the force of law when the interest was paid,”.
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(2) The Principal Act is amended in section 246(3) by substituting the following for paragraph (h)—
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“(h) interest, other than interest referred to in paragraphs (a) to (g), paid by a relevant person in the ordinary course of a trade or business carried on by that person to a company—
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(I) which, by virtue of the law of a relevant territory, is resident in the relevant territory for the purposes of tax and that relevant territory imposes a tax that generally applies to interest receivable in that territory by companies from sources outside that territory, or
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(II) where the interest—
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(A) is exempted from the charge to income tax under arrangements made with the government of a territory outside the State having the force of law under the procedures set out in section 826(1), or
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(B) would be exempted from the charge to income tax if arrangements made, on or before the date of payment of the interest, with the government of a territory outside the State, that do not have the force of law under the procedures set out in section 826(1), had the force of law when the interest was paid,
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except where such interest is paid to that company in connection with a trade or business which is carried on in the State by that company through a branch or agency.”.
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(3) This section applies to interest paid on or after the date of passing of this Act, other than interest paid under an agreement entered into before that date.
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