Corporation Tax Act, 1976

Patent royalties: provisions supplemental to section 34 of Finance Act, 1973.

170.—(1) In this section—

“disregarded income” means—

(a) income which by virtue of section 34 (2) of the Finance Act, 1973 (income from patent royalties), has been disregarded for purposes of income tax, and

(b) income which by virtue of section 34 (2) of the Finance Act, 1973 , and section 11 (6) has been disregarded for purposes of corporation tax;

“other profits” includes a dividend or other distribution of a company which is resident in the State but does not include a distribution to which subsection (3) (a) (ii) applies.

(2) Where a distribution for an accounting period is made by a company in part out of disregarded income and in part out of other profits, the distribution shall be treated as if it consisted of two distributions respectively made out of disregarded income and out of other profits.

(3) (a) So much of any distribution as has been made out of disregarded income—

(i) shall not be regarded as income for any purpose of the Income Tax Acts; and

(ii) shall, where the recipient of such distribution is a company, be deemed for the purposes of this section to be disregarded income.

(b) The recipient of any distribution, including part of a distribution treated under subsection (2) as a distribution, made out of disregarded income shall not be entitled to a tax credit in respect of that distribution.

(4) (a) Where a company makes a distribution, including part of a distribution treated under subsection (2) as a distribution, in respect of any right or obligation to which section 178 (dividends at gross rate or of gross amount) relates and the distribution is made out of disregarded income, the company shall make a supplementary distribution of an amount equal to the amount of the tax credit which would have applied in respect of the distribution if subsection (3) (b) had not been enacted.

(b) Subsection (3) shall apply to a supplementary distribution under this subsection as if that supplementary distribution were a distribution made wholly out of disregarded income.

(5) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (2) as a distribution, made by a company out of disregarded income, sections 5 and 83 (5) (Schedule F) shall apply to the company so that the statements provided for by those sections shall show, as respects each such distribution, in addition to the particulars required to be given apart from this section, that the distribution is made out of disregarded income.

(6) In relation to any supplementary distribution under subsection (4), section 5 shall apply to the company so that the statement required by that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.

(7) Where a company makes a distribution for an accounting period, the distribution shall be regarded for the purposes of this section as having been made out of the distributable income (as defined in section 64 (4)) of that period to the extent of that income and in relation to the excess of the distributions over that income, out of the most recently accumulated income.

(8) The provisions of subsections (5) and (6) of section 64 shall apply for the purposes of this section as they apply for the purposes of that section.