Finance Act, 1998

Relief for double taxation.

60.—The Principal Act is hereby amended as respects accounting periods ending on or after the 1st day of April, 1998, in Schedule 24—

(a) by the substitution for—

“Relief from Income Tax and Corporation Tax by Means of Credit in Respect of Foreign Tax

Interpretation

1. (1) In this Schedule, except where the context otherwise requires—”

of

“Relief from Income Tax and Corporation Tax by Means of Credit in Respect of Foreign Tax

Part 1

Interpretation

1. (1) In this Schedule, except where the context otherwise requires—”,

(b) in paragraph 1(1), by the substitution for the definition of “foreign tax” of the following definition:

“‘foreign tax’ means—

(a) in the case of any territory in relation to which arrangements have the force of law, any tax chargeable under the laws of that territory for which credit may be allowed under the arrangements, and

(b) in any other case, any tax chargeable in respect of which credit may be allowed by virtue of subparagraph (3) of paragraph 9A.”,

(c) by the insertion, after paragraph 9, of the following paragraphs:

“Part 2

Unilateral Relief

9A. (1) To the extent appearing from the following provisions of this paragraph, relief (in this paragraph referred to as ‘unilateral relief’) from corporation tax in respect of profits represented by dividends shall be given in respect of tax payable under the law of any territory other than the State by allowing that tax as a credit against corporation tax, notwithstanding that there are not for the time being in force any arrangements providing for such relief.

(2) Unilateral relief shall be such relief as would fall to be given under this Schedule if arrangements with the government of the territory in question containing the provisions in subparagraphs (3) to (5) were in force, and a reference in this Schedule to credit under arrangements shall be construed as a reference to unilateral relief.

(3) Subject to Part 1 and to subparagraph (5), credit for tax paid under the law of a territory other than the State in relation to a relevant dividend paid by a company resident in the territory to a company resident in the State shall be allowed against corporation tax attributable to the profits represented by the dividend.

(4) For the purposes of subparagraph (3)—

(a) ‘tax paid under the law of a territory other than the State in relation to a relevant dividend paid by a company’ means—

(i) tax which is directly charged on the dividend, whether by charge to tax, deduction of tax at source or otherwise, and the whole of which tax neither the company nor the recipient would have borne if the dividend had not been paid, and

(ii) tax paid in respect of its profits under the law of the territory by the company paying the dividend in so far as that tax is properly attributable to the proportion of the profits represented by the dividend,

(b) ‘relevant dividend’ means a dividend paid by a company resident in a territory other than the State to a company resident in the State which either directly or indirectly owns, or is a subsidiary of a company which directly or indirectly owns, not less than 25 per cent of the ordinary share capital of the company paying the dividend; for the purposes of this subparagraph one company is a subsidiary of another company if the other company owns, directly or indirectly, not less than 50 per cent of the ordinary share capital of the first company.

(5) Credit shall not be allowed by virtue of subparagraph (3)—

(a) for tax paid under the law of a territory where there are arrangements with the government of the territory,

(b) for any tax which is relevant foreign tax within the meaning of section 449, or

(c) for any tax in respect of which credit may be allowed under section 831.

(6) Where—

(a) unilateral relief may be given in respect of a dividend, and

(b) it appears that the assessment to corporation tax made in respect of the dividends is not made in respect of the full amount thereof, or is incorrect having regard to the credit, if any, which falls to be given by way of unilateral relief,

any such assessment may be made or amended as is necessary to ensure that the total amount of the dividend is assessed, and the proper credit, if any, is given in respect thereof.

(7) In this Schedule in its application to unilateral relief, references to tax payable or paid under the law of a territory outside the State include only references to taxes which are charged on income or capital gains and which correspond to corporation tax and capital gains tax.

Dividends Paid Between Related Companies: Relief for Irish and Third Country Taxes

9B. (1) Where a foreign company pays a dividend to an Irish company and the foreign company is related to the Irish company, then for the purpose of allowing credit under any arrangements against corporation tax in respect of the dividend, there shall, subject to Part 1, be taken into account as if it were tax payable under the law of the territory in which the foreign company is resident—

(a) any income tax or corporation tax payable in the State by the foreign company in respect of its profits, and

(b) any tax which, under the law of any other territory, is payable by the foreign company in respect of its profits.

(2) Where the foreign company has received a dividend from a third company and the third company is related to the foreign company and is connected with the Irish company, then, subject to subparagraph (4), there shall be treated for the purposes of subparagraph (1) as tax paid by the foreign company in respect of its profits any underlying tax payable by the third company, to the extent that it would be taken into account under this Schedule if the dividend had been paid by a foreign company to an Irish company and arrangements had provided for underlying tax to be taken into account.

(3) Where the third company has received a dividend from a fourth company and the fourth company is related to the third company and is connected with the Irish company, then, subject to subparagraph (4), tax payable by the fourth company shall similarly be treated for the purposes of subparagraph (2) as tax paid by the third company, and so on for successive companies each of which is related to the one before and is connected with the Irish company.

(4) Subparagraphs (2) and (3) are subject to the following limitations—

(a) no tax shall be taken into account in respect of a dividend paid by an Irish company except corporation tax payable in the State and any tax for which that company is entitled to credit under this Schedule, and

(b) no tax shall be taken into account in respect of a dividend paid by a foreign company to another such company unless it could have been taken into account under this Schedule had the other company been an Irish company.

(5) (a) In this paragraph—

‘foreign company’ means a company resident outside the State;

‘Irish company’ means a company resident in the State;

‘underlying tax’, in relation to a dividend, means tax borne by the company paying the dividend on the relevant profits (within the meaning of paragraph (8)) in so far as it is properly attributable to the proportion of the relevant profits represented by the dividend.

(b) For the purposes of this paragraph—

(i) a company is related to another company if that other company—

(I) owns directly or indirectly, or

(II) is a subsidiary of a company which owns directly or indirectly,

not less than 25 per cent of the ordinary share capital of the first-mentioned company,

(ii) one company is a subsidiary of another company if the other company owns, directly or indirectly, not less than 50 per cent of the ordinary share capital of the first-mentioned company,

and

(iii) a company is connected with another company if that other company—

(I) owns directly or indirectly, or

(II) is a subsidiary of a company which owns directly or indirectly,

not less than 10 per cent of the ordinary share capital of the first-mentioned company.”,

and

(d) in paragraph 10, by the substitution for—

“Miscellaneous

10. Credit shall not be allowed”

of

“Part 3

Miscellaneous

10. Credit shall not be allowed”.