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Dividends paid out of foreign profits.
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49.— (1) The Principal Act is amended by inserting the following after section 129:
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“129A.— (1) (a) In this section ‘profits’, in relation to a company for a period of account, means the amount of the profits after taxation as shown in the profit and loss account or income statement for that period as laid before the annual general meeting of the company.
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(b) For the purposes of this section—
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(i) any question whether a company is connected with another company shall be determined in accordance with section 10 (as it applies for the purposes of the Tax Acts) and subparagraph (ii),
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(ii) where a company is party to a scheme or arrangement, the main purpose, or one of the main purposes, of which is the avoidance of the whole or part of a distribution being treated as a taxable distribution, then the company shall be treated as connected with any other company which is a party to that scheme or arrangement.
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(c) For the purposes of subsection (5) ‘control’ shall be construed in accordance with subsections (2) to (6) of section 432 as if in subsection (6) of that section for ‘5 or fewer participators’ there were substituted ‘persons resident in the State’.
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(2) Where—
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(a) a company receives a distribution from another company (in this section referred to as the ‘paying company’) resident in the State with which it is connected, and
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(b) the paying company became resident in the State in the period—
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(i) beginning on the date—
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(I) 10 years before the date the distribution was made, or
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(II) of passing of the Finance Act 2010,
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whichever is the later, and
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(ii) ending on the date the distribution is made,
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then, subject to subsection (5), section 129 shall not apply to such amount of the distribution as is paid out of profits arising before the paying company became resident in the State and that amount shall be treated as income chargeable to tax under Case IV of Schedule D.
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(3) (a) For the purposes of this section, where the amount of a distribution made by the paying company on or after the date (or the last such date if there was more than one date) it became resident in the State exceeds the distributable profits of the company for the period (in this subsection referred to as the ‘specified period’)—
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(i) beginning on the date (or the last such date if there was more than one date) the company became resident in the State, and
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(ii) ending on the last day of the accounting period of the company immediately preceding the accounting period in which the distribution is made,
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then the excess shall be treated as paid out of profits arising before the company became resident in the State.
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(b) For the purposes of this subsection—
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(i) the distributable profits of the paying company for a specified period shall, subject to subparagraph (ii), be taken to be the aggregate of the profits of the periods of account (in this subsection referred to as ‘corresponding periods’) which fall wholly or partly within the specified period, as reduced by the aggregate of so much of the amounts of any distributions made in the specified period as were amounts to which section 129 applied,
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(ii) where a corresponding period falls partly within a specified period, the amount to be included in the distributable profits for the specified period in respect of the profits of that corresponding period shall be the profits of that corresponding period reduced by applying the fraction—
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A
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B
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where—
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A is the length of the period common to the specified period and the corresponding period, and
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B is the length of the corresponding period.
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(4) Where, by virtue of subsection (2), section 129 does not apply to the whole or part of a distribution (such whole or part, as the case may be, in this section referred to as the ‘taxable distribution’) received by a company (in this subsection referred to as the ‘first-mentioned company’) from another company resident in the State then the first-mentioned company shall be entitled to reduce the corporation tax attributable to the taxable distribution by the amount of the credit for foreign tax that would have been applied, under the provisions of Schedule 24, in reducing the corporation tax chargeable in respect of a dividend of an amount equal to the taxable distribution received by the first-mentioned company from the other company on the day before the day (or the last such day where there was more than one) the other company became resident in the State.
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(5) Subsection (2) shall not apply where the paying company was at all times before the date it became resident in the State (or the last such date where there was more than one date) not controlled by persons resident in the State.”.
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(2) This section shall apply to distributions made on or after the passing of this Act.
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