|
|
|
Outbound payments defensive measures
|
| |
36. (1) Part 33 of the Principal Act is amended by the insertion of the following Chapter after section 817T:
|
|
| |
CHAPTER 5
|
|
| |
Outbound payments defensive measures
|
|
| |
Interpretation
|
|
| |
817U. (1) In this Chapter—
|
|
| |
‘arrangement’ has the same meaning as it has in Part 35A;
|
|
| |
‘associated entities’ shall be construed in accordance with subsection (3);
|
|
| |
‘controlled foreign company charge’ has the same meaning as it has in Part 35B;
|
|
| |
‘domestic tax’ means income tax, corporation tax or capital gains tax;
|
|
| |
‘EEA Agreement’ means the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as adjusted by the Protocol signed at Brussels on 17 March 1993;
|
|
| |
‘EEA State’ means a state which is a contracting party to the EEA Agreement;
|
|
| |
‘entity’ has the same meaning as it has in Part 35C;
|
|
| |
‘excluded payment’ means a payment, or a portion thereof, made by a company to the extent that it is reasonable to consider that—
|
|
| |
(a) an amount of income, profits or gains arising from the payment is within the charge to—
|
|
| |
(i) supplemental tax,
|
|
| |
(ii) foreign tax at a nominal rate greater than zero per cent, or
|
|
| |
(iii) domestic tax, other than as applied by this Chapter,
|
|
| |
or
|
|
| |
(b) the payment is made out of an amount of income, profits or gains where—
|
|
| |
(i) that income, profits or gains are within the charge to foreign tax at a nominal rate greater than zero per cent, and
|
|
| |
(ii) in calculating the amount of foreign tax to which that income, profits or gains are subject, no account is taken of that payment or any amount in respect of that payment,
|
|
| |
and includes a payment which would be a payment to which paragraph (a) or (b) applies but for the fact that the entity which would be within the charge to tax—
|
|
| |
(I) in respect of that payment, or
|
|
| |
(II) in respect of the income, profits or gains out of which the payment is made,
|
|
| |
is a pension fund, government body or other entity, resident in a territory other than a specified territory, that, under the laws of that territory, is exempted from tax which generally applies to profits, income or gains in that territory;
|
|
| |
‘foreign company charge’ has the same meaning as it has in Part 35B;
|
|
| |
‘foreign tax’ has the same meaning as it has in Part 35C;
|
|
| |
‘permanent establishment’, in respect of a company, means a fixed place of business situated in a territory other than where that company is resident, through which the business of a company is wholly or partly carried on;
|
|
| |
‘qualified IIR’, ‘qualified UTPR’, and ‘qualified domestic top-up tax’ have the same meaning, respectively, as they have in Part 4A;
|
|
| |
‘relevant distribution’ has the same meaning as it has in Chapter 8A of Part 6;
|
|
| |
‘relevant Member State’ means—
|
|
| |
(a) a Member State of the European Union, or
|
|
| |
(b) not being such a Member State, an EEA State;
|
|
| |
‘relevant payment’ means a payment made by a company of an amount of interest or royalties which has been, or may be, in any accounting period, deducted, allowed or relieved in computing its or another company’s profits or losses for the purposes of corporation tax;
|
|
| |
‘royalty’ means a payment of any kind for—
|
|
| |
(a) the use of, or the right to use—
|
|
| |
(i) any copyright of literary, artistic or scientific work, including cinematograph films,
|
|
| |
(ii) any patent, trademark, design or model, plan, secret formula or process,
|
|
| |
or
|
|
| |
(b) information concerning industrial, commercial or scientific experience;
|
|
| |
‘specified territory’ means a territory, other than a relevant Member State, which is a listed territory or a zero-tax territory;
|
|
| |
‘supplemental tax’ means—
|
|
| |
(a) a foreign company charge,
|
|
| |
(b) a qualified IIR,
|
|
| |
(c) a qualified UTPR,
|
|
| |
(d) a qualified domestic top-up tax, or
|
|
| |
(e) any other tax which is similar to any of the taxes referred to in paragraphs (a) to (d);
|
|
| |
‘tax period’ has the same meaning as it has in section 835Z;
|
|
| |
‘zero-tax territory’ means a territory that, other than in respect of an entity whose income, profits or gains are treated by that territory, or would be so treated but for an insufficiency of income, profits or gains, as arising or accruing to another entity—
|
|
| |
(a) generally subjects entities to tax at a rate of zero per cent on income, profits and gains, or
|
|
| |
(b) does not generally subject entities, whether on a remittance basis or otherwise, to a tax on income, profits and gains.
|
|
| |
(2) In this Chapter, ‘listed territory’ has the same meaning as in section 835YA subject to the modification that references to ‘an accounting period beginning’ shall be read as references to ‘the making of a payment or distribution’.
|
|
| |
(3) In this Chapter, two entities shall be ‘associated entities’ in respect of each other where—
|
|
| |
(a) one entity, directly or indirectly, possesses or is beneficially entitled to—
|
|
| |
(i) where the other entity is an entity having share capital, more than 50 per cent of the issued share capital of the other entity, or
|
|
| |
(ii) where the other entity is an entity not having share capital, an interest of more than 50 per cent of the ownership rights in the other entity,
|
|
| |
(b) one entity, directly or indirectly, is entitled to exercise more than 50 per cent of the voting power in the other entity,
|
|
| |
(c) one entity (in this paragraph referred to as ‘the first-mentioned entity’), directly or indirectly, holds such rights as would—
|
|
| |
(i) where the other entity is a company, if the whole of the profits of that other entity were distributed, entitle the first-mentioned entity, directly or indirectly, to receive more than 50 per cent of the profits so distributed, or
|
|
| |
(ii) where the other entity is an entity other than a company, if the share of the profits of that other entity to which the first-mentioned entity is entitled, directly or indirectly, is more than 50 per cent,
|
|
| |
(d) one entity has definite influence in the management of the other entity, or
|
|
| |
(e) there is another entity in respect of which the two entities are, in accordance with paragraph (a), (b), (c) or (d), associated entities.
|
|
| |
(4) For the purposes of subsection (3)(d), one entity (in this subsection referred to as ‘the first-mentioned entity’) shall be considered to have definite influence in the management of another entity (in this subsection referred to as ‘the second-mentioned entity’) where the first-mentioned entity has the ability to participate, on the board of directors or equivalent governing body of the second-mentioned entity, in the financial and operating policy decisions of the second-mentioned entity, where that ability causes, or could cause, the affairs of the second-mentioned entity to be conducted in accordance with the wishes of the first-mentioned entity.
|
|
| |
(5) For the purposes of this Chapter, an entity shall be regarded as being a resident of a territory if—
|
|
| |
(a) in a case where the territory is a territory with the government of which arrangements having the force of law by virtue of section 826(1) have been made, the entity is regarded as being a resident of that territory under those arrangements, and
|
|
| |
(b) in any other case, the entity is by virtue of the law of a territory resident for the purposes of tax in that territory,
|
|
| |
but where an entity is not resident in any territory in accordance with paragraph (a) or (b) it shall be regarded as being resident in the territory under whose laws it was created.
|
|
| |
(6) For the purposes of this Chapter, where a relevant payment or a relevant distribution is made to an entity or a permanent establishment (in this subsection referred to as ‘the first-mentioned entity or permanent establishment’) and some or all of that payment or distribution is treated as arising or accruing to another entity or permanent establishment (in this section referred to as ‘the second- mentioned entity or permanent establishment’) or an individual, that is resident or situated in a different territory, under the tax law of the territory where—
|
|
| |
(a) the first-mentioned entity or permanent establishment is resident or situated, as the case may be, and
|
|
| |
(b) the second-mentioned entity or permanent establishment or such individual is resident or situated, as the case may be,
|
|
| |
then, for the purposes of this Chapter, the payment or distribution, or the relevant portion thereof, shall be treated as if it had been made to the second-mentioned entity or permanent establishment or that individual.
|
|
| |
Payment of interest
|
|
| |
817V. (1) This section applies to a relevant payment of interest paid by a company to—
|
|
| |
(a) an associated entity that is resident in a specified territory and is not resident in another territory that is not a specified territory, or
|
|
| |
(b) a permanent establishment of an associated entity which is situated in a specified territory,
|
|
| |
to the extent that the relevant payment of interest is not an excluded payment.
|
|
| |
(2) Sections 64(2), 198(1)(c), 246(3), 246A(3)(a)(A) and 246A(3)(b)(A) shall not apply to a relevant payment of interest to which this section applies.
|
|
| |
(3) Subsection (2) of section 246 shall apply to a relevant payment of interest to which this section applies as if a reference to a payment of yearly interest in that subsection were a reference to a relevant payment of interest to which this section applies.
|
|
| |
(4) Where this section applies to a relevant payment of interest on a security referred to in section 37(2), section 36(2) shall apply as if ‘shall be paid without the deduction of tax, but all such interest’ were omitted.
|
|
| |
(5) Where an arrangement is entered into by any person and it is reasonable to consider that the main purpose or one of the main purposes of the arrangement, or any part of the arrangement, is the avoidance of the application of any of the provisions of this section to a relevant payment of interest, directly or indirectly, to an associated entity in a specified territory, then this section shall apply as if the arrangement, or that part of the arrangement, had not been entered into.
|
|
| |
(6) Subject to subsection (5), this section shall not apply to a relevant payment of interest by a company where that relevant payment of interest is a payment—
|
|
| |
(a) to which section 64(2)(b)(i) or 246A(3)(a)(A) would apply, but for subsection (2), or
|
|
| |
(b) to which section 246A(3)(b)(A) would apply, but for subsection (2), solely by virtue of section 246A(3)(b)(ii)(I),
|
|
| |
where it is reasonable to consider that the company is not, and should not be, aware that any portion of the relevant payment of interest is made to an associated entity.
|
|
| |
(7) This section shall not apply to the portion of the relevant payment of interest made by a company to an entity to the extent that—
|
|
| |
(a) a corresponding amount has been paid by that entity to another person in a tax period which commences within 12 months of the end of the tax period in which the payment is made by the company,
|
|
| |
(b) the corresponding amount referred to in paragraph (a) would have been an excluded payment had that corresponding amount been paid directly by the company to that other person referred to in that paragraph, and
|
|
| |
(c) all payments were made for bona fide commercial purposes.
|
|
| |
(8) Nothing in this section shall result in the application of section 246(2) to an entity other than a company which makes a relevant payment of interest.
|
|
| |
Payment of royalties
|
|
| |
817W. (1) This section applies to a relevant payment of a royalty by a company to—
|
|
| |
(a) an associated entity that is resident in a specified territory and is not resident in another territory that is not a specified territory, or
|
|
| |
(b) a permanent establishment of an associated entity which is situated in a specified territory,
|
|
| |
to the extent that the relevant payment of a royalty is not an excluded payment.
|
|
| |
(2) (a) The receipt of a relevant payment of a royalty to which this section applies shall be deemed to be annual profits arising to the associated entity, or permanent establishment of the associated entity, referred to in subsection (1), as the case may be, from property in the State for the purposes of section 18(1).
|
|
| |
(b) A relevant payment of a royalty to which this section applies shall be an annual payment charged with tax under Schedule D for the purposes of section 238(2).
|
|
| |
(c) Subsections (3) and (4) of section 242A shall not apply to a relevant payment of a royalty to which this section applies.
|
|
| |
(3) Section 757(2) shall not apply to a relevant payment of a royalty to which this section applies.
|
|
| |
(4) Where an arrangement is entered into by any person and it is reasonable to consider that the main purpose or one of the main purposes of the arrangement, or any part of the arrangement, is the avoidance of the application of any of the provisions of this section to a relevant payment of a royalty, directly or indirectly, to an associated entity in a specified territory, then this section shall apply as if the arrangement, or that part of the arrangement, had not been entered into.
|
|
| |
Making of distribution
|
|
| |
817X. (1) This section applies to a relevant distribution where—
|
|
| |
(a) a company resident in the State makes a relevant distribution to—
|
|
| |
(i) an associated entity that is resident in a specified territory and is not resident in another territory that is not a specified territory, or
|
|
| |
(ii) a permanent establishment of an associated entity which is situated in a specified territory,
|
|
| |
(b) to the extent that the relevant distribution is not an excluded payment, and
|
|
| |
(c) to the extent that the relevant distribution is made out of income, profits or gains which have not been chargeable, directly or indirectly, to—
|
|
| |
(i) domestic tax,
|
|
| |
(ii) foreign tax at a nominal rate greater than zero per cent,
|
|
| |
(iii) a controlled foreign company charge,
|
|
| |
(iv) a supplemental tax, or
|
|
| |
(v) any other tax which is similar to any of the taxes referred to in subparagraphs (i) to (iv).
|
|
| |
(2) Sections 140(3)(a), 142(2), 153(4), 172B(7), 172D(2) and 172E(1) shall not apply to a relevant distribution to which this section applies.
|
|
| |
(3) Where an arrangement is entered into by any person and it is reasonable to consider that the main purpose or one of the main purposes of the arrangement, or any part of the arrangement, is the avoidance of the application of any of the provisions of this section to the making of a relevant distribution, directly or indirectly, to an associated entity in a specified territory, then this section shall apply as if the arrangement, or that part of the arrangement, had not been entered into.
|
|
| |
Reporting
|
|
| |
817Y. (1) In this section—
|
|
| |
‘chargeable period’ has the meaning assigned to it by section 959A;
|
|
| |
‘specified return date for the chargeable period’ has the meaning assigned to it by section 959A.
|
|
| |
(2) Every company who makes a payment of interest or a royalty, or makes a relevant distribution to—
|
|
| |
(a) an associated entity that is resident in a specified territory and is not resident in another territory that is not a specified territory, or
|
|
| |
(b) a permanent establishment of an associated entity which is situated in a specified territory,
|
|
| |
in a chargeable period shall, in the return required to be delivered under Chapter 3 of Part 41A, provide the following details in respect of each payment or distribution—
|
|
| |
(i) the amount of the payment or distribution,
|
|
| |
(ii) the amount of tax withheld on the payment or distribution, and
|
|
| |
(iii) the territory where the entity or permanent establishment is resident, or situated, as the case may be.
|
|
| |
Scope of application
|
|
| |
817Z. (1) Subject to subsection (2), this Chapter shall apply to a payment of interest or royalties, or the making of a distribution, on or after 1 April 2024.
|
|
| |
(2) Where arrangements are in place on or before 19 October 2023, in respect of which there is a payment of interest or royalties, or the making of a distribution, then this Chapter shall apply to such payment or distribution made, as the case may be, on or after 1 January 2025.”.
|
|
| |
(2) The Principal Act is amended—
|
|
| |
(a) in section 36(2), by the substitution of “Subject to section 817V, the interest on all” for “The interest on all”,
|
|
| |
(b) in section 64(2), by the substitution of “Subject to section 817V, section 246(2)” for “Section 246(2)”,
|
|
| |
(c) in section 140(3), in paragraph (a), by the substitution of “Subject to section 817X, so much of” for “So much of”,
|
|
| |
(d) in section 142(2), by the substitution of “Subject to section 817X, where a distribution” for “Where a distribution”,
|
|
| |
(e) in section 153(4), by the substitution of “Subject to section 817X, where for any year” for “Where for any year”,
|
|
| |
(f) in section 172B(7), by the substitution of “Subject to section 817X, this section shall not apply” for “This section shall not apply”,
|
|
| |
(g) in section 172D(2), by the substitution of “Subject to section 817X, section 172B” for “Section 172B”,
|
|
| |
(h) in section 172E(1), by the substitution of “Subject to sections 172F(6) and 817X, section 172B shall not” for “Subject to section 172F(6), section 172B shall not”,
|
|
| |
(i) in section 198(1), in paragraph (c), by inserting “subject to section 817V and” after “Notwithstanding any other provision of the Income Tax Acts but”,
|
|
| |
(j) in section 242A—
|
|
| |
(i) in subsection (3), by the substitution of “Subject to section 817W, where” for “Where”, and
|
|
| |
(ii) in subsection (4), by the substitution of “Subject to section 817W, a company” for “A company”,
|
|
| |
(k) in section 246(3), by the substitution of “Subject to section 817V, subsection (2)” for “Subsection (2)”,
|
|
| |
(l) in section 246A(3), by the substitution of “Subject to section 817V, as respects” for “As respects”, and
|
|
| |
(m) in section 452A, by the insertion of the following subsection after subsection (2): “(3) Section 130(2)(d)(iv) shall not apply to an amount of interest to which
|
|
| |
section 817V(1) applies from which tax has been properly deducted at the standard rate in force at the time of the payment in accordance with section 246(2) and such tax is not refundable.”.
|
