Finance Act, 1968

Relief to certain companies liable to foreign tax.

35.—(1) In this section—

“accounting period” includes a part of an accounting period;

“external tax” means a tax which is chargeable and payable under the law of the territory in which the paying company is resident, being a territory to which this section applies, and which corresponds to Irish tax:

Provided that a tax which is payable under the law of a province, state or other part of a country, or which is levied by or on behalf of a municipality or other local body shall not be deemed for the purposes of this subsection to correspond to Irish tax;

“income”, in relation to corporation profits tax, means profits;

“Irish tax” means Irish income tax or corporation profits tax or both of those taxes as the circumstances of the case may require.

(2) This section applies to every territory other than—

(a) Northern Ireland and Great Britain,

(b) the United States of America, and

(c) a territory with the Government of which arrangements are for the time being in force by virtue of section 361 of the Income Tax Act, 1967 .

(3) Where a company (in this section referred to as the investing company) has paid, by deduction or otherwise, or is liable to pay, by reference to any part of its income arising in a territory to which this section applies, Irish tax for any year of assessment or accounting period and it is shown to the satisfaction of the Revenue Commissioners—

(a) that the said part of the investing company's income consists of a dividend, or interest, paid to it by a company resident in the territory (in this section referred to as the paying company) not less than one-half of the voting power in which is controlled, directly or indirectly, by the investing company,

(b) that the said dividend, or interest, arose from the investment in the paying company by the investing company, whether by way of loan or otherwise, of a sum or sums representing—

(i) profits the Irish tax referable to which has been reduced to nil under Chapter IV of Part XXV of the Income Tax Act, 1967 , or under Part III of the Finance (Miscellaneous Provisions) Act, 1956 , or

(ii) such proportion of profits the Irish tax referable to which has been reduced otherwise than to nil under the said provisions as is equal to the proportion by which the said Irish tax has been so reduced,

and

(c) that the investing company has paid external tax in the said territory in respect of the said part of its income,

the Revenue Commissioners may grant to the investing company in respect of the said year of assessment, or accounting period, as the case may be, such relief as is just with a view to affording relief in respect of the double taxation of the said part of the investing company's income, but not exceeding whichever of the following is the lesser, that is to say, one-half of the total of the Irish tax that would, but for this section, be payable by the investing company in respect of the said part of its income or the amount of the external tax paid or payable in the said territory in respect of the said part of its income after deduction of any relief to which the company may be entitled in that territory.

(4) (a) External tax paid by the paying company in respect of its profits shall be taken into account in considering whether any, and if so, what relief ought to be allowed in respect of a dividend paid by the paying company to the investing company, and for the purposes of this section, other than this subsection, such tax, or the appropriate part thereof, shall be regarded as external tax paid by the investing company.

(b) The provisions of paragraph 9 of Schedule 10 to the Income Tax Act, 1967 , shall apply for the purpose of ascertaining the amount of the external tax paid by the paying company which is to be taken into account in relation to any dividend paid by the paying company to the investing company as they apply to the computation of foreign tax to be taken into account for the purposes of the said paragraph 9.

(5) (a) Nothing in this section shall authorise the granting of relief under this section to any company in respect of any year of assessment, or any accounting period, to such an extent as would reduce the aggregate amount (computed after deduction of any relief to which the company may be entitled in the said territory) of the Irish tax and external tax payable by such company in respect of any part of its income of the kind described in subsection (3) (a) arising in a territory to which this section applies below the amount of Irish tax which would be payable by the company in respect of the said part of its income if that part of its income had arisen in the State and had been liable in the hands of the investing company to income tax and corporation profits tax.

(b) In computing for the purposes of paragraph (a) the amount of Irish tax which would be so payable by the company in respect of the said part of its income if that part had arisen in the State—

(i) no deduction for external tax shall be made from the said part of its income, and

(ii) where pursuant to subsection (4) external tax paid by the paying company is regarded as external tax paid by the investing company, the said part of the investing company's income shall be treated as increased by the amount of the external tax which is so regarded.

(6) Sections 363 and 364 of the Income Tax Act, 1967 , shall have effect as if references therein to double taxation relief included references to relief granted under this section.

(7) Relief under this section shall be given as a credit against Irish tax chargeable by reference to the part of the investing company's income referred to in subsection (3) (a) and such credit shall first be applied in reducing the amount of any corporation profits tax so chargeable and, so far as it cannot be so applied, in reducing the income tax so chargeable.

(8) (a) Any claim for relief under this section shall be made in writing to the inspector not later than six years from the end of the year of assessment or accounting period to which it relates.

(b) An appeal to the Appeal Commissioners shall lie on any question arising under this section in like manner as an appeal would lie against an assessment to income tax, and the provisions of the Income Tax Acts relating to appeals shall apply and have effect accordingly.

(c) Where under the law in force in any territory to which this section applies, provision is made for the allowance, in respect of the payment of Irish tax, of relief from tax payable under that law, the obligation as to secrecy imposed by any enactment shall not prevent the disclosure to the authorised officer of the government of that territory of such facts as may be necessary to enable the proper relief to be given under the law thereof.

(9) Paragraph 5 (3) of Schedule 10 to the Income Tax Act, 1967 , is hereby amended by the insertion after “section 365” of “or section 35 of the Finance Act, 1968”.

(10) This section shall have effect in relation to income tax for the year beginning on the 6th day of April, 1968, and subsequent years of assessment and in relation to corporation profits tax for any accounting period beginning on or after the 6th day of April, 1968, and for the unexpired portion of any accounting period current at that date.