TAXES CONSOLIDATION ACT, 1997

“shares” includes loan stock, debentures and any interest or rights in or over, or any option in relation to, shares, loan stock or debentures, and references to “shareholder” shall be construed accordingly.

(b)(i) For the purposes of this section, there shall be a disposal of shares by a shareholder where the shareholder disposes of shares or is treated under the Capital Gains Tax Acts as disposing of shares, and references to a disposal of shares shall include references to a part disposal of shares within the meaning of those Acts.

• (ii) Where under any arrangement between a close company (in this subparagraph referred to as “the first-mentioned company”) and its, or some of its, shareholders (being any arrangement similar to an arrangement entered into for the purposes of or in connection with a scheme of reconstruction or amalgamation) another close company issues shares to those shareholders in respect of or in proportion to (or as nearly as may be in proportion to) their holdings of shares in the first-mentioned company, but the shares in the first-mentioned company are either retained by the shareholders or are cancelled, then, those shareholders shall for the purposes of this section be treated as making a disposal or a part disposal, as the case may be, of the shares in the first-mentioned company in exchange for those shares held by them in consequence of such arrangement.

• (c) For the purposes of this section, the interest of a shareholder in a trade or business shall not be significantly reduced following a disposal of shares, or the carrying out of a scheme or arrangement of which the disposal of shares is a part, only if at any time after the disposal the percentage of—

• (i) the ordinary share capital of the close company carrying on the trade or business at such time which is beneficially owned by the shareholder at such time,

• (ii) any profits, which are available for distribution to equity holders, of the close company carrying on the trade or business at such time to which the shareholder is beneficially entitled at such time, or

• (iii) any assets, available for distribution to equity holders on a winding up, of the close company carrying on the trade or business at such time to which the shareholder would be beneficially entitled at such time on a winding up of the close company, is not significantly less than the percentage of that ordinary share capital or those profits or assets, as the case may be, of the close company carrying on the trade or business at any time before the disposal—

• (I) which the shareholder beneficially owned, or

• (II) to which the shareholder was beneficially entitled,

at such time before the disposal, and sections 413 to 415 and section 418 shall apply, but without regard to section 411(1)(c) in so far as it relates to those sections, with any necessary modifications, to the determination for the purposes of this paragraph of the percentage of share capital or other amount which a shareholder beneficially owns or is beneficially entitled to, as they apply to the determination for the purposes of Chapter 5 of Part 12 of the percentage of any such amount which a company so owns or is so entitled to.

• (d) The value of any amount received in money's worth shall for the purposes of this section be the market value of the money's worth at the time of its receipt.

• (2) This section shall apply for the purposes of counteracting any scheme or arrangement undertaken or arranged by a close company, or to which the close company is a party, being a scheme or arrangement the purpose of which, or one of the purposes of which, is to secure that any shareholder in the close company avoids or reduces a charge or assessment to income tax under Schedule F by converting into a capital receipt of the shareholder any amount which would otherwise be available for distribution by the close company to the shareholder by means of a dividend.

• (3) Subject to subsection (7), this section shall apply to a disposal of shares in a close company by a shareholder if, following the disposal or the carrying out of a scheme or arrangement of which the disposal is a part, the interest of the shareholder in any trade or business (in this section referred to as “the specified business”) which was carried on by the close company at the time of the disposal, whether or not the specified business continues to be carried on by the close company after the disposal, is not significantly reduced.

• (4) Subject to subsection (5) and notwithstanding section 130(1) or any provision of the Capital Gains Tax Acts, the amount of—

• (a) the proceeds in either or both money and money's worth received by a shareholder in respect of a disposal of shares in a close company to which this section applies, or

• (b) if it is less than those proceeds, the excess of those proceeds over any consideration, being consideration which—

• (i) is new consideration received by the close company for the issue of those shares, and

• (ii) has not previously been taken into account for the purposes of this subsection, shall be treated for the purposes of the Tax Acts as a distribution (within the meaning of the Corporation Tax Acts) made at the time of the disposal by the close company to the shareholder.

• (5)
• (a) In this subsection, “capital receipt” means, as appropriate in the circumstances, any amount of either or both money and money's worth (other than shares issued by a close company carrying on the specified business) which—

• (i) is received by a shareholder in respect of a disposal of shares or by reason of any act done pursuant to a scheme or arrangement of which the disposal is a part, and

• (ii) apart from this section is not chargeable to income tax in the hands of the shareholder.

• (b) The amount which at any time may be treated under subsection (4) as a distribution made by a close company to a shareholder in respect of any disposal of shares in the close company shall not exceed the amount of the capital receipt, or the aggregate of the amounts of the capital receipts, which at such time has or have been received by the shareholder—

• (i) in respect of the disposal, or

• (ii) by reason of any act done pursuant to a scheme or arrangement of which the disposal is a part.

• (c) A capital receipt received by a shareholder at any time on or after the disposal shall in respect of such time result in so much of the amount mentioned in subsection (4) being treated as a distribution (which is made by the close company to the shareholder at the time of the disposal) as does not exceed the amount of the capital receipt, or the aggregate of the amounts of such capital receipts, which at such time on or after the disposal has or have been received by the shareholder.

• (d) Where as a result of a shareholder having received a capital receipt a close company is treated as having made a distribution to the shareholder under subsection (4), any provision of the Income Tax Acts in respect of interest on unpaid tax shall apply for the purposes of tax due in respect of that distribution as if the tax were due and payable only from the day on which the shareholder received the capital receipt.

• (6) Notwithstanding section 136(1), where a shareholder in a close company is treated under this section as having received a distribution from the close company, the shareholder shall only be entitled to a tax credit in respect of the distribution to the extent that the close company has paid advance corporation tax in respect of the distribution in accordance with Chapter 8 of Part 6; but, where a close company would but for the application of section 162 have paid an amount or an additional amount of advance corporation tax in respect of a distribution, the close company shall be treated as having paid such an amount or additional amount of advance corporation tax in respect of the distribution for the purposes of this subsection.

• (7) This section shall not apply as respects a disposal of shares in a close company by a shareholder where it is shown to the satisfaction of the inspector or, on the hearing or the rehearing of an appeal, to the satisfaction of the Appeal Commissioners or a judge of the Circuit Court, as the case may be, that the disposal was made for bona fide commercial reasons and not as part of a scheme or arrangement the purpose or one of the purposes of which was the avoidance of tax.

PART 34 Provisions Relating to the Residence of Individuals

818 Interpretation (Part 34). [FA94 s149]

818.—In this Part other than in section 825—

“the Acts” means—

• (a) the Tax Acts,

• (b) the Capital Gains Tax Acts, and

• (c) the Capital Acquisitions Tax Act, 1976, and the enactments amending or extending that Act,

and any instruments made thereunder;

“authorised officer” means an officer of the Revenue Commissioners authorised by them in writing for the purposes of this Part;

“present in the State”, in relation to an individual, means the personal presence of the individual in the State;

“tax” means any tax payable in accordance with any provision of the Acts.

819 Residence. [FA94 s150]

819.—(1) For the purposes of the Acts, an individual shall be resident in the State for a year of assessment if the individual is present in the State—

• (a) at any one time or several times in the year of assessment for a period in the whole amounting to 183 days or more, or

• (b) at any one time or several times—

• (i) in the year of assessment, and

• (ii) in the preceding year of assessment,

for a period (being a period comprising in the aggregate the number of days on which the individual is present in the State in the year of assessment and the number of days on which the individual was present in the State in the preceding year of assessment) in the aggregate amounting to 280 days or more.

• (2) Notwithstanding subsection (1)(b), where for a year of assessment an individual is present in the State at any one time or several times for a period in the aggregate amounting to not more than 30 days—

• (a) the individual shall not be resident in the State for the year of assessment, and

• (b) no account shall be taken of the period for the purposes of the aggregate mentioned in subsection (1)(b).

• (3)
• (a) Notwithstanding subsections (1) and, (2), an individual—

• (i) who is not resident in the State for a year of assessment, and

• (ii) to whom paragraph (b) applies,

may at any time elect to be treated as resident in the State for that year and, where an individual so elects, the individual shall for the purposes of the Acts be deemed to be resident in the State for that year.

• (b) This paragraph shall apply to an individual who satisfies an authorised officer that the individual is in the State—

• (i) with the intention, and

• (ii) in such circumstances,

that the individual will be resident in the State for the following year of assessment.

• (4) For the purposes of this section, an individual shall be deemed to be present in the State for a day if the individual is present in the State at the end of the day.

820 Ordinary residence. [FA94 s151]

820.—(1) For the purposes of the Acts, an individual shall be ordinarily resident in the State for a year of assessment if the individual has been resident in the State for each of the 3 years of assessment preceding that year.

• (2) An individual ordinarily resident in the State shall not for the purposes of the Acts cease to be ordinarily resident in the State for a year of assessment unless the individual has not been resident in the State in each of the 3 years of assessment preceding that year.

821 Application of sections 17 and 18(1) and Chapter 1 of Part 3. [FA94 s152; FA95 s169(1)]

821.—(1) Where an individual is not resident but is ordinarily resident in the State, sections 17 and 18(1) and Chapter 1 of Part 3 shall apply as if the individual were resident in the State; but this section shall not apply in respect of—

• (a) the income of an individual derived from one or more of the following—

• (i) a trade or profession, no part of which is carried on in the State, and

• (ii) an office or employment, all the duties of which are performed outside the State, and

• (b) other income of an individual which in any year of assessment does not exceed £3,000.

• (2) In determining for the purposes of subsection (1) whether the duties of an office or employment are performed outside the State, any duties performed in the State, the performance of which is merely incidental to the performance of the duties of the office or employment outside the State, shall be treated as having been performed outside the State.

822 Split year residence. [FA94 s153]

822.—(1) For the purposes of a charge to tax on any income, profits or gains from an employment, where during a year of assessment (in this section referred to as “the relevant year”)—

(a)(i) an individual who has not been resident in the State for the preceding year of assessment satisfies an authorised officer that the individual is in the State—

• (I) with the intention, and

• (II) in such circumstances,

that the individual will be resident in the State for the following year of assessment, or

• (ii) an individual who is resident in the State satisfies an authorised officer that the individual is leaving the State, other than for a temporary purpose—

• (I) with the intention, and

• (II) in such circumstances,

that the individual will not be resident in the State for the following year of assessment,

and

• (b) the individual would but for this section be resident in the State for the relevant year,

subsection (2) shall apply in relation to the individual.

• (2)
• (a) An individual to whom paragraphs (a)(i) and (b) of subsection (1) apply shall be deemed to be resident in the State for the relevant year only from the date of his or her arrival in the State.

• (b) An individual to whom paragraphs (a)(ii) and (b) of subsection (1) apply shall be deemed to be resident in the State for the relevant year only up to and including the date of his or her leaving the State.

• (3) Where by virtue of this section an individual is resident in the State for part of a year of assessment, the Acts shall apply as if—

• (a) income arising during that part of the year or, in a case to which section 71(3) applies, amounts received in the State during that part of the year were income arising or amounts received for a year of assessment in which the individual is resident in the State, and

• (b) income arising or, as the case may be, amounts received in the remaining part of the year were income arising or amounts received in a year of assessment in which the individual is not resident in the State.

823 Deduction for income earned outside the State. [FA94 s154; FA95 s170(1)]

823.—(1) In this section—

“qualifying day”, in relation to an office or employment of an individual, means a day which is—

• (a) one of at least 14 consecutive days on which the individual is absent from the State for the purposes of the performance of the duties of the office or employment or of those duties and the duties of other offices or employments of the individual outside the State and which (taken as a whole) are substantially devoted to the performance of such duties, and

• (b) one on which the individual concerned is absent from the State at the end of the day,

but no day shall be counted more than once as a qualifying day;

“relevant period”, in relation to a year of assessment, means a continuous period of 12 months—

• (a) part only of which is comprised in the year of assessment, and

• (b) no part of which is comprised in another relevant period;

“the specified amount” means an amount determined by the formula—

D × E _ 365

where—

D is the number of qualifying days in the year of assessment concerned, and

E is all the income, profits or gains from an office, employment or pension whether chargeable under Schedule D or E (including income from offices or employments the duties of which are performed in the State) of an individual in that year.

• (2)
• (a) Subject to paragraph (b), this section shall apply to—

• (i) an office of director of a company which is within the charge to corporation tax, or would be within the charge to corporation tax if it were resident in the State, and which carries on a trade or profession,

• (ii) an employment other than—

• (I) an employment the emoluments of which are paid out of the revenue of the State, or

• (II) an employment with any board, authority or other similar body established by or under statute.

• (b) This section shall not apply in any case where the income from an office or employment—

• (i) is chargeable to tax in accordance with section 71(3),

• (ii) is subject to section 73, or would be so subject if the employment were deemed to be property situated where the employment is exercised, or

• (iii) is income to which section 822 applies.

• (3) Where for any year of assessment an individual resident in the State makes a claim in that behalf to and satisfies an authorised officer that—

• (a) the duties of an office or employment to which this section applies of the individual are performed wholly or partly outside the State, and

• (b) either—

• (i) the number of days in that year which are qualifying days in relation to the office or employment (together with any days which are qualifying days in relation to any other such office or employment of the individual), or

• (ii) the number of such days referred to in subparagraph (i) in a relevant period in relation to that year,

amounts to at least 90 days,

there shall be deducted from the income, profits or gains from the office or employment to be assessed under Schedule D or E, as may be appropriate, an amount equal to the specified amount.

• (4) Notwithstanding anything in the Acts, the income, profits or gains from an office or employment shall for the purposes of this section be deemed not to include any amounts paid in respect of expenses incurred wholly, exclusively and necessarily in the performance of the duties of the office or employment.

824 Appeals. [FA94 s156]

824.—(1) An individual aggrieved by a decision of an authorised officer on any question arising under the provisions of this Chapter which require an individual to satisfy an authorised officer on such a question may, by notice in writing to that effect given to the authorised officer within 2 months from the date on which notice of the decision is given to the individual, make an application to have the question heard and determined by the Appeal Commissioners.

• (2) Where an application is made under subsection (1), the Appeal Commissioners shall hear and determine the question concerned in the like manner as an appeal made to them against an assessment, and the provisions of the Acts relating to such an appeal (including the provisions relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law) shall apply accordingly with any necessary modifications.

825 Residence treatment of donors of gifts to the State. [FA77 s53]

825.—(1) In this section—

“the Acts” means—

• (a) the Tax Acts,

• (b) the Capital Gains Tax Acts, and

• (c) the Capital Acquisitions Tax Act, 1976;

“donor” means an individual who makes a gift to the State;

“gift” means a gift of property to the State which, on acceptance of the gift by the Government pursuant to the State Property Act, 1954, becomes vested pursuant to that Act in a State authority within the meaning of that Act;

“Irish tax” means any tax imposed by the Acts;

“property” includes interests and rights of any description;

“relevant date”, in relation to an individual (being a donor or the spouse of a donor), means the date (not being earlier than the 1st day of September, 1974) on which the individual leaves the State for the purpose of residence (other than occasional residence) outside the State;

“tax in that country” means any tax imposed in that country which is identical with or substantially similar to Irish tax;

“visits” means—

• (a) in relation to a donor, visits by the donor to the State after the relevant date for the purpose of advising on the management of the property which is the subject of the gift, being visits that are in the aggregate less than 182 days in any year of assessment in which they are made, and

• (b) in relation to the spouse of a donor, visits by that spouse when accompanying the donor on visits of the kind referred to in paragraph (a).

• (2) Where for any year of assessment a person (being a donor or the spouse of a donor) is resident in a country outside the State for the purposes of tax in that country and is chargeable to that tax without any limitation as to chargeability, then, notwithstanding anything to the contrary in the Tax Acts—

• (a) as respects the year of assessment in which the relevant date occurs, that person shall not as from the relevant date be regarded as ordinarily resident in the State for the purposes of Irish tax, and

• (b) as respects any subsequent year of assessment, in determining whether that person is resident or ordinarily resident in the State for the purposes of Irish tax, visits shall be disregarded.

PART 35 Double Taxation Relief

CHAPTER 1 Principal reliefs

826 Agreements for relief from double taxation. [ITA67 s361; FA74 s86 and Sch2 PtI; CTA76 s22(2), s23(1) and s166(1) and Sch4 PtI; FA83 s47(4)]

826.—(1) Where the Government by order declare that arrangements specified in the order have been made with the government of any territory outside the State in relation to affording relief from double taxation in respect of—

• (a) income tax;

• (b) corporation tax in respect of income and chargeable gains;

• (c) any taxes of a similar character imposed by the laws of the State or by the laws of that territory; and that it is expedient that those arrangements should have the force of law, then, subject to this section and sections 168 and 833 to 835, the arrangements shall, notwithstanding any enactment other than section 168, have the force of law.

• (2) Schedule 24 shall apply where arrangements which have the force of law by virtue of this section provide that tax payable under the laws of the territory concerned shall be allowed as a credit against tax payable in the State.

• (3) Any arrangements to which the force of law is given under this section may include provision for relief from tax for periods before the passing of this Act or before the making of the arrangements and provisions as to income or chargeable gains which is or are not subject to double taxation, and subsections (1) and (2) shall apply accordingly.

• (4) For the purposes of subsection (1), arrangements made with the head of a foreign state shall be regarded as made with the government of that state.

• (5) Any order made under this section may be revoked by a subsequent order, and any such revoking order may contain such transitional provisions as appear to the Government to be necessary or expedient.

• (6) Where an order is proposed to be made under this section, a draft of the order shall be laid before Dáil Éireann and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann.

• (7) Where any arrangements have the force of law by virtue of this section, the obligation as to secrecy imposed by any enactment shall not prevent the Revenue Commissioners or any authorised officer of the Revenue Commissioners from disclosing to any authorised officer of the government with which the arrangements are made such information as is required to be disclosed under the arrangements.

• (8) The necessary apportionments as respects corporation tax shall be made where arrangements having the force of law by virtue of this section apply to the unexpired portion of an accounting period current at a date specified by the arrangements, and any such apportionment shall be made in proportion to the number of months or fractions of months in the part of the relevant accounting period before that date and in the remaining part of the relevant accounting period respectively.

• (9) The Revenue Commissioners may from time to time make regulations generally for carrying out the provisions of this section or any arrangements having the force of law under this section and may in particular, but without prejudice to the generality of the foregoing, by those regulations provide—

• (a) for securing that relief from taxation imposed by the laws of the territory to which any such arrangements relate does not enure to the benefit of persons not entitled to such relief, and

• (b) for authorising, in cases where tax deductible from any periodical payment has, in order to comply with any such arrangements, not been deducted and it is discovered that the arrangements do not apply to that payment, the recovery of the tax by assessment on the person entitled to the payment or by deduction from subsequent payments.

827 Application to corporation tax of arrangements made in relation to corporation profits tax under old law. [CTA76 s22(1) and s23(1)]

827.—Subject to any express amendments made by the Corporation Tax Acts and except in so far as arrangements made on or after the 31st day of March, 1976, provide otherwise, any arrangements made under section 361 of the Income Tax Act, 1967, or any earlier enactment corresponding to that section, in relation to corporation profits tax shall apply in relation to corporation tax and income and chargeable gains chargeable to corporation tax as they are expressed to apply in relation to corporation profits tax and profits chargeable to corporation profits tax, and not as they apply in relation to income tax; but this section shall not affect the operation, as they apply to corporation tax, of section 826(7) and paragraph 12 of Schedule 24.

828 Capital gains tax: double taxation relief. [CGTA75 s38, s51(1) and Sch1 PtI par3(6); FA97 s146(1) and Sch9 PtI par 9(3)]

828.—(1) For the purposes of giving relief from double taxation in relation to capital gains tax charged under the law of any country outside the State, in section 826 and Schedule 24 as they apply for the purposes of income tax, for references to income there shall be substituted references to chargeable gains, for references to the Income Tax Acts there shall be substituted references to the Capital Gains Tax Acts and for references to income tax there shall be substituted references to capital gains tax meaning, as the context may require, tax charged under the law of the State or tax charged under the law of a country outside the State.

• (2) In so far as capital gains tax charged under the law of a country outside the State may by virtue of this section be taken into account under section 826 and Schedule 24 as applied by this section, that tax, whether relief is given by virtue of this section in respect of it or not, shall not be taken into account for the purposes of those provisions as they apply apart from this section.

• (3) Section 826(7) shall apply in relation to capital gains tax as it applies in relation to income tax.

• (4) Subject to subsections (1) to (3) and the other provisions of the Capital Gains Tax Acts relating to double taxation, the tax chargeable under the law of any country outside the State on the disposal of an asset which is borne by the person making the disposal shall be allowable as a deduction in the computation under Chapter 2 of Part 19 of the gain accruing on the disposal.

829 Treatment for double taxation relief purposes of foreign tax incentive reliefs. [FA70 s57(2) to (4); CTA76 s166(1) and Sch4 PtI]

829.—(1) This section shall apply to any relief given with a view to promoting industrial, commercial, scientific, educational or other development in a territory outside the State.

• (2) For the purposes of section 826 and Schedule 24, any amount of tax under the law of a territory outside the State which would have been payable but for a relief to which this section applies given under that law (being a relief with respect to which provision is made in arrangements for double taxation relief which are the subject of an order under section 826(1)) shall be treated as having been payable, and references in section 826 and in Schedule 24 to double taxation, tax payable or chargeable or tax not chargeable directly or by deduction shall be construed accordingly.

• (3) The Revenue Commissioners may make regulations generally for carrying out the provisions of this section or any arrangements having the force of law under section 826 and may in particular, but without prejudice to the generality of the foregoing, provide in the regulations—

• (a) for the purposes of this section or of the regulations, for the application (with or without modifications) of any provision of the Tax Acts or any regulations made under those Acts, including the provisions relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law, and

• (b) that the whole or any part of a dividend paid out of profits or gains which consist of or include profits or gains in relation to which double taxation relief is given by virtue of this section is not to be regarded as income or profits for any purpose of the Tax Acts.

CHAPTER 2 Miscellaneous

830 Relief to certain companies liable to foreign tax. [CTA76 s163]

830.—(1) In this section—

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

“external tax” means a tax 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 corporation tax or income tax or both of those taxes, but a tax 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 for the purposes of this subsection be deemed not to correspond to those taxes.

• (2) This section shall apply 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 826.

• (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, tax for any accounting period and it is shown to the satisfaction of the Revenue Commissioners that—

• (a) that 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 50 per cent of the voting power in which is controlled directly or indirectly by the investing company,

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

• (i) profits the Irish tax referable to which was reduced to nil under—

• (I) Part III of the Finance (Miscellaneous Provisions) Act, 1956,

• (II) Chapter IV of Part XXV of the Income Tax Act, 1967, or

• (III) Part IV of the Corporation Tax Act, 1976,

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

• (iii) profits arising from exempted trading operations which by virtue of—

• (I) Parts I and II of the Finance (Miscellaneous Provisions) Act, 1958,

• (II) Chapter I of Part XXV of the Income Tax Act, 1967, or

• (III) Part V of the Corporation Tax Act, 1976,

were not, in relation to the company by which such operations were carried on, taken into account for any purpose of—

• (A) the Income Tax Acts,

• (B) Part V of the Finance Act, 1920, and the enactments amending or extending that Part, or

• (C) the Corporation Tax Acts,

and

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

then, the Revenue Commissioners may grant to the investing company in respect of that accounting period such relief as is just with a view to affording relief in respect of the double taxation of that part of the investing company's income, but not exceeding the lesser of—

• (aa) 50 per cent of the total of the corporation tax which but for this section would be payable by the investing company in respect of that part of its income, and

• (bb) the amount of the external tax paid or payable in the territory in respect of that 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 of such tax shall be regarded as external tax paid by the investing company.

• (b) Paragraph 8 of Schedule 24 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 it applies to the computation of foreign tax to be taken into account for the purposes of that paragraph.

• (5)
• (a) Nothing in this section shall authorise the granting of relief under this section to any company in respect of 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 territory) of the corporation 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 corporation tax which would be payable by the company in respect of that 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 corporation tax.

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

• (i) no deduction for external tax shall be made from that 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, that part of the investing company's income shall be treated as increased by the amount of the external tax which is so regarded.

• (6) Relief under this section shall be given as a credit against corporation tax chargeable by reference to the part of the investing company's income referred to in subsection (3)(a).

• (7)
• (a) Any claim for relief under this section shall be made in writing to the inspector not later than 6 years from the end of the accounting period to which it relates.

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

831 Implementation of Council Directive No. 90/435/EEC concerning the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States. [FA91 s36]

831.—(1) (a) In this section—

“arrangements” means arrangements having the force of law by virtue of section 826;

“bilateral agreement” means any arrangements, protocol or other agreement between the Government and the government of another Member State;

“company” means a company of a Member State;

“company of a Member State” has the meaning assigned to it by Article 2 of the Directive;

“the Directive” means Council Directive No. 90/435/EEC of 23 July 1990¹ on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States;

“distribution” means income from shares or from other rights, not being debt claims, to participate in a company's profits, and includes any amount assimilated to income from shares under the taxation laws of the State of which the company making the distribution is resident;

“foreign tax” means any tax which—

• (i) is payable under the laws of a Member State other than the State, and

• (ii) (I) is specified in paragraph (c) of Article 2 of the Directive, or

• (II) is substituted for and is substantially similar to a tax so specified;

“Member State” means a Member State of the European Communities;

“parent company” means a company resident in the State which owns at least 25 per cent of the share capital of a company not so resident, but where a bilateral agreement contains a provision to the effect—

• (i) that a company shall only be a parent company during any uninterrupted period of at least 2 years throughout which at least 25 per cent of the share capital of the company not resident in the State is owned by the first-mentioned company, or

• (ii) that—

• (I) the requirement (being the requirement for the purposes of this definition) that a company resident in the State own at least 25 per cent of the share capital of the company not so resident shall be treated as a requirement that the company so resident holds at least 25 per cent of the voting rights in the company not so resident, or

• (II) that requirement shall be so treated and a company shall only be a parent company during any uninterrupted period of at least 2 years throughout which at least 25 per cent of the voting rights in the company not resident in the State is held by the first-mentioned company,

then, in its application to a company to which the provision in the bilateral agreement applies, this definition shall apply subject to that provision and shall be construed accordingly.

• (b) For the purposes of this section, a company shall be a subsidiary of another company which owns shares or holds voting rights in it where the other company's ownership of those shares or holding of those rights is sufficient for that other company to be a parent company.

• (c) A word or expression used in this section and in the Directive has, unless the contrary intention appears, the same meaning in this section as in the Directive.

• (2) Subject to subsections (3) and (4), where a parent company receives a distribution chargeable in the State to corporation tax, other than a distribution in a winding up, from its subsidiary—

• (a) credit shall be allowed for—

• (i) any withholding tax charged on the distribution by the Federal Republic of Germany, the Hellenic Republic or the Portuguese Republic, pursuant to the derogations provided for in Article 5 of the Directive, and

• (ii) any foreign tax, not chargeable directly or by deduction in respect of the distribution, which is borne by the company making the distribution, and is properly attributable to the proportion of its profits which is represented by the distribution, in so far as that foreign tax exceeds so much of any tax credit in respect of the distribution as is payable to the parent company by the Member State in which the company making the distribution is resident,

against corporation tax in respect of the distribution to the extent that credit for such withholding tax and foreign tax would not otherwise be so allowed, and

• (b) notwithstanding Chapter 2 of Part 4, the distribution shall not be a dividend to which that Chapter applies.

• (3) Where by virtue of subsection (2)(a) a company is to be allowed credit for tax payable under the laws of a Member State other than the State, Schedule 24 shall apply for the purposes of that subsection as if—

• (a) the provisions of that subsection were arrangements providing that tax so payable shall be allowed as a credit against tax payable in the State, and

• (b) references in Schedule 24 to a dividend were references to a distribution within the meaning of this section.

• (4) Subsection (2) shall apply without prejudice to any provision of a bilateral agreement.

832 Provisions in relation to Convention for reciprocal avoidance of double taxation in the State and the United Kingdom of income and capital gains. [FA77 s39(1) and (3) to (5); FA96 s132(2) and Sch5 PtII]

832.—(1) In this section—

“the Convention” means the Convention between the Government of Ireland and the Government of the United Kingdom for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, and the Protocol amending the Convention, both of which are set out in the Schedule to the Double Taxation Relief (Taxes on Income and Capital Gains) (United Kingdom) Order, 1976 (S.I. No. 319 of 1976);

“dividend” means a dividend within the meaning of Article 11(4) of the Convention.

• (2) Subject to sections 70 and 71 as modified by section 73, where a person is chargeable to income tax or corporation tax under Case III of Schedule D on income which is a dividend in respect of which the person is entitled to a tax credit under Article 11 (2)(b) of the Convention, the income so chargeable shall include the amount of the tax credit.

• (3) For the purpose of giving effect to the Convention, the Tax Acts shall, for any year for which the Convention is in force, apply subject to the modifications in section 73.

• (4)
• (a) In applying section 707 in the case of a society registered under the enactments for the time being in force in the United Kingdom corresponding to the Friendly Societies Acts, 1896 to 1977, only expenses of management attributable to the life business referable to contracts of assurance made on or after the 6th day of April, 1976, shall be taken into account.

• (b) In applying subsection (4) of section 726 in the case of a society referred to in paragraph (a), there shall be excluded from the liabilities of which B in that subsection is the average any liabilities to policy holders arising from contracts made before the 6th day of April, 1976.

• (c) This subsection shall be construed as one with Part 26.

833 Convention with United States of America. [ITA67 s358(2) and (3).]

833.—(1) Schedule 24 shall apply for the purposes of giving effect to the Convention set out in Schedule 25 concluded on the 13th day of September, 1949, between the Government of Ireland and the Government of the United States of America.

• (2) The Revenue Commissioners may from time to time make regulations in relation to the granting of the reliefs specified in the Convention and may in particular by those regulations provide—

• (a) for securing that no such reliefs from taxation imposed by the laws of the United States of America as are provided for in the Convention shall enure to the benefit of persons not entitled to such reliefs, and

• (b) for authorising, in cases where tax deductible from any periodical payment has, in order to comply with the terms of the Convention, not been deducted and it is discovered that the Convention does not apply to that payment, the recovery of the tax by assessment on the person entitled to the payment or by deduction from subsequent payments.

834 Relief in respect of ships documented under laws of United States of America. [ITA67 s359]

834.—Exemption shall be granted from tax in respect of so much of the income of a citizen of the United States of America not resident in the State or of a corporation organised in the United States of America as is derived from the operation of a ship or ships documented under the laws of the United States of America.

835 Saver for arrangements made under section 362 of Income Tax Act, 1967. [FA87 s23(2)]

835.—Notwithstanding the repeal of section 362 of the Income Tax Act, 1967, by section 23(1) of the Finance Act, 1987, where before the 9th day of July, 1987, an order was made under section 362 of the Income Tax Act, 1967, the arrangement to which the order relates shall continue to have the force of law.

PART 36 Miscellaneous Special Provisions

836 Allowances for expenses of members of Oireachtas. [Section 4 of the Oireachtas (Allowances to Members) and Ministerial and Parliamentary Offices (Amendment) Act, 1992]

836.—(1) An allowance payable under section 3 of the Oireachtas (Allowances to Members) and Ministerial and Parliamentary Offices (Amendment) Act, 1992, shall be exempt from income tax and shall not be reckoned in computing income for the purposes of the Income Tax Acts.

• (2) Sections 114 and 115 shall not apply in relation to expenses in full settlement of which an allowance is payable under section 3 of the Oireachtas (Allowances to Members) and Ministerial and Parliamentary Offices (Amendment) Act, 1992, and no claim shall lie under those sections in respect of those expenses; but where a Minister of the Government, the Attorney General or a Minister of State, being—

• (a) a member of Dáil Éireann for a constituency outside the county borough and the administrative county of Dublin, or

• (b) a member of Seanad Éireann whose main residence is situated outside that county borough and administrative county,

is, arising out of the performance of his or her duties as an office holder or as a member of the Oireachtas, obliged to maintain a second residence in addition to his or her main residence, he or she shall be granted a deduction under section 114 in respect of expenses incurred by him or her in maintaining that second residence.

837 Members of the clergy and ministers of religion. [ITA67 s544(1); FA69 s65(1) and Sch5 PtI]

837.—In assessing the income tax chargeable under any Schedule on a member of the clergy or minister of any religious denomination, the following deductions may be made from any profits, fees or emoluments of his or her profession—

• (a) any sums of money paid or expenses incurred by him or her wholly, exclusively and necessarily in the performance of his or her duty as a member of the clergy or minister of any religious denomination;

• (b) such part of the rent (not exceeding one-eighth), as the inspector by whom the assessment is made may allow, paid by him or her in respect of a dwelling house any part of which is used mainly and substantially for the purposes of his or her duty as a member of the clergy or minister of any religious denomination.

838 Special portfolio investment accounts. [FA93 s14 (other than proviso to sub(4)(c) and sub(6)(b)); FA94 s12(2) and s34(b); FA95 s11(2); FA96 s37(1); FA97 s31, s146(1) and Sch9 PtI par17(1)]

838.—(1) (a) In this section—

“designated broker” means a person—

• (i) which is a dealing member firm of the Irish Stock Exchange or a member firm (which carries on a trade in the State through a branch or agency) of a stock exchange of any other Member State of the European Communities, and

• (ii) which has sent to the Revenue Commissioners a notification of its name and address and of its intention to accept specified deposits;

“gains” means chargeable gains within the meaning of the Capital Gains Tax Acts, including gains which but for section 607 would be chargeable gains;

“market value” shall be construed in accordance with section 548;

“ordinary shares” means shares forming part of a company's ordinary share capital;

“qualifying shares” means ordinary shares in a company which are—

• (i) listed in the official list of the Irish Stock Exchange, or

• (ii) quoted on the market known as the Developing Companies Market, or the market known as the Exploration Securities Market, of the Irish Stock Exchange,

other than—

• (I) shares in an investment company within the meaning of Part XIII of the Companies Act, 1990,

• (II) shares in an undertaking for collective investment in transferable securities within the meaning of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 1989 (S.I. No. 78 of 1989), or

• (III) shares in a company, being shares the market value of which may be expected to approximate at all times to the market value of the proportion of the assets of the company which they represent;

“relevant income or gains” means the aggregate of the income and gains, including losses, arising from relevant investments, but only so much of income arising to or gains accruing to the special portfolio investment account shall be relevant income or gains as is or is to be—

• (i) paid to, or

• (ii) accumulated or invested for the benefit of,

the individual in whose name the special portfolio investment account is held, or would be so paid, accumulated or invested if any gains accruing to the account in accordance with subsection (4)(e) were gains on an actual disposal of the assets concerned;

“relevant investment” means an investment in—

• (i) qualifying shares and specified qualifying shares, or

• (ii) qualifying shares, specified qualifying shares and securities,

as the case may be, acquired by a designated broker by the expenditure of money contributed by means of a specified deposit, and held by a designated broker in a special portfolio investment account;

“securities” means securities—

• (i) issued under the authority of the Minister for Finance, or

• (ii) issued by the Electricity Supply Board, Radio Telefís Éireann, ICC Bank plc, Bord Telecom Éireann, Irish Telecommunications Investments plc, Córas Iompair Éireann, ACC Bank plc, Bord na Móna, Aerlínte Éireann cuideachta phoiblí theoranta, Aer Lingus plc or Aer Rianta cuideachta phoiblí theoranta,

which are listed in the official list of the Irish Stock Exchange;

“special portfolio investment account” means an account opened on or after the 1st day of February, 1993, in which a relevant investment is held and in respect of which the conditions referred to in paragraph (c) are complied with;

“specified deposit” means a sum of money paid by an individual to a designated broker for the purpose of acquiring assets which will form part of a relevant investment;

“specified qualifying shares”, in relation to a special portfolio investment account, means qualifying shares in a company which when the shares are acquired for the account has an issued share capital the market value of which is less than £100,000,000.

• (b) For the purposes of this section, Chapter 4 of Part 8 shall be construed as if—

• (i) references to “deposit”, “interest”, “relevant deposit”, “relevant deposit taker”, “relevant interest” and “special savings account” were respectively references to “specified deposit”, “income or gains”, “relevant investment”, “designated broker”, “relevant income or gains” and “special portfolio investment account” within the meaning of this section, and

• (ii) subsections (4) and (5) of section 258 and section 259 had not been enacted.

• (c) Notwithstanding subsection (3), section 264 shall apply to a special portfolio investment account as if—

• (i) paragraphs (d) to (i) of subsection (1) of that section had not been enacted, and

• (ii) the conditions in subsection (2) of this section had been included in subsection (1) of that section.

• (2) The conditions referred to in subsection (1)(c)(ii) are:

• (a) each special portfolio investment account and all assets held in such an account shall be kept separately from all other investment accounts, if any, operated by a designated broker;

• (b) the amount of a specified deposit or, if there is more than one, the aggregate of such amounts in respect of assets held at the same time as part of a special portfolio investment account shall not exceed—

• (i) in the case of a special portfolio investment account in respect of which—

• (I) the first specified deposit was made on or before the 5th day of April, 2000, and

• (II) an amount (in this paragraph referred to as “the particular amount”) equal to the whole or a part of the specified deposit or specified deposits has been used to acquire shares in a company quoted on the market known as the Developing Companies Market of the Irish Stock Exchange

and those shares are at that time held as assets of the special portfolio investment account,

£50,000 increased by the lesser of—

• (A) the particular amount, and

• (B) £10,000,

and

• (ii) in the case of any other special portfolio investment account, £50,000;

• (c) the designated broker shall ensure that the aggregate of the market value of a relevant investment does not exceed £50,000 at any time on or after the fifth anniversary of the date on which the first specified deposit was made by an individual in respect of that relevant investment;

• (d) the aggregate of the consideration given for shares which are at any time before the 1st day of February, 1994, assets of a special portfolio investment account shall not be less than—

• (i) as respects qualifying shares, 40 per cent, and

• (ii) as respects specified qualifying shares, 6 per cent,

of the aggregate of the consideration given for the assets of the account at that time;

• (e) the aggregate of the consideration given for shares which are at any time within the year ending on the 31st day of January, 1995, assets of a special portfolio investment account shall not be less than—

• (i) as respects qualifying shares, 45 per cent, and

• (ii) as respects specified qualifying shares, 9 per cent,

of the aggregate of the consideration given for the assets of the account at that time;

• (f) the aggregate of the consideration given for shares which are at any time within the year ending on the 31st day of January, 1996, assets of a special portfolio investment account shall not be less than—

• (i) as respects qualifying shares, 50 per cent, and

• (ii) as respects specified qualifying shares, 10 per cent,

of the aggregate of the consideration given for the assets of the account at that time;

• (g) the aggregate of the consideration given for shares which are at any time on or after the 1st day of February, 1996, assets of a special portfolio investment account shall not be less than—

• (i) as respects qualifying shares, 55 per cent, and

• (ii) as respects specified qualifying shares, 10 per cent,

of the aggregate of the consideration given for the assets of the account at that time;

and for the purposes of—

• (I) paragraphs (b) and (c), a disposal of shares or securities, being shares or securities, as the case may be, of the same class acquired for a special portfolio investment account at different times, shall be assumed to be a disposal of shares or securities, as the case may be, acquired later, rather than of shares or securities, as the case may be, acquired earlier for the special portfolio investment account, and

• (II) paragraphs (d) to (g), the amount of the consideration given for shares shall be determined in accordance with sections 547 and 580.

• (3) Chapter 4 of Part 8 (other than section 259) shall, subject to this section and with any other necessary modifications, apply to special portfolio investment accounts as it applies to special savings accounts; but that Chapter shall so apply as if, in relation to relevant interest payable in respect of a relevant deposit or relevant deposits held in a special savings account, the rate of appropriate tax were 10 per cent.

• (4)
• (a) Paragraphs (b) to (h) shall apply notwithstanding any other provision of the Tax Acts and the Capital Gains Tax Acts.

• (b) Where for any year of assessment a loss arises from the computation of relevant income or gains, that loss shall be included in the computation of the relevant income or gains of the special portfolio investment account for the next year of assessment, and, in so far as relief for the loss cannot be so given, it shall be set against such relevant income or gains in the next year of assessment and, where appropriate, in each subsequent year of assessment in so far as it cannot be so relieved, and no further relief shall be allowed under any provision of the Tax Acts or the Capital Gains Tax Acts in respect of that loss.

• (c) Sections 556, 601, 607 and 1028(4) shall not apply in relation to any gains referable to a relevant investment.

• (d) (i) In this paragraph—

“the appropriate amount in respect of the interest” means the appropriate amount in respect of the interest which would be determined in accordance with Schedule 21 if the designated broker were the first buyer and the designated broker carried on a trade to which section 749(1) applies; but, in so determining the appropriate amount in respect of the interest in accordance with Schedule 21, paragraph 3(4) of that Schedule shall apply as if “in the opinion of the Appeal Commissioners” were deleted;

“securities” has the same meaning as in section 815.

• (ii) Subject to subparagraph (iii), where—

• (I) in a year of assessment (in this subparagraph referred to as “the first year of assessment”) securities which are assets of a special portfolio investment account are disposed of, and

• (II) in the following year of assessment interest becoming payable in respect of the securities is receivable by the special portfolio investment account,

then, for the purposes of computing the relevant income or gains for the first year of assessment, the price paid by the designated broker for the securities shall be treated as reduced by the appropriate amount in respect of the interest.

• (iii) Where for a year of assessment subparagraph (ii) applies so as to reduce the price paid for securities, the amount by which the price paid for the securities is reduced shall be treated as a loss arising in the following year of assessment from the disposal of the securities.

• (e) For the purpose of computing relevant income or gains of a special portfolio investment account for a year of assessment, each asset of a special portfolio investment account on the 5th day of April in that year of assessment shall be deemed to have been disposed of and immediately reacquired by the designated broker on that day at the asset's market value on that day.

• (f) Subject to subsection (5), where in a year of assessment the relevant income or gains of a special portfolio investment account includes a distribution from a company resident in the State—

• (i) the aggregate of the amount or value of that distribution and the amount of the tax credit in respect of that distribution shall be taken into account in computing the relevant income or gains for that year of assessment, and

• (ii) the designated broker may set the tax credit against appropriate tax payable in respect of that special portfolio investment account for the year of assessment in which the distribution is made and, where the tax credit exceeds that appropriate tax, may claim to have the excess paid to the designated broker in that person's capacity as the designated broker for that special portfolio investment account.

• (g) A tax credit in respect of a distribution to which paragraph (f) applies shall not be available for any purpose other than that specified in that paragraph.

• (h) Capital gains tax shall not be chargeable on the disposal of assets held as part of a relevant investment; but this paragraph shall not prevent any such disposals from being taken into account in computing the amount of relevant income or gains on which appropriate tax is payable.

• (5)
• (a) In this subsection—

“eligible shares” has the same meaning as in section 488;

“qualifying company” has the meaning assigned to it by section 495.

• (b) Without prejudice to the treatment of losses on eligible shares as allowable losses, gains accruing on the disposal or deemed disposal of eligible shares in a qualifying company shall not for the purposes of computing appropriate tax in accordance with subsection (6) be treated as gains.

• (c) Distributions included in the relevant income or gains of a special portfolio investment account in respect of eligible shares in qualifying companies shall not be taken into account in computing appropriate tax in accordance with subsection (6); but, notwithstanding subsection (4)(f) or section 136, the tax credit in respect of a distribution to which this subsection applies shall be disregarded for the purposes of the Tax Acts and the Capital Gains Tax Acts.

• (6)
• (a) For the purposes of sections 257 and 258, a designated broker shall, in relation to each special portfolio investment account—

• (i) be deemed to have made a payment on the 5th day of April in each year of assessment of the amount of relevant income or gains for that year of assessment, and

• (ii) be liable to make a payment of appropriate tax in relation to such payment.

• (b) The designated broker may deduct an amount on account of any such payment of appropriate tax and the individual beneficially entitled to the assets in the special portfolio investment account shall allow such deduction from any income or from the proceeds of the sale of any assets which the designated broker holds as part of the special portfolio investment account; but, where there are no such funds or insufficient funds available out of which the designated broker may satisfy the appropriate tax, the amount of such tax shall be an amount due to the designated broker from the person beneficially entitled to the relevant investment.

• (c) For the purposes of this section, section 258 shall apply as if in subsection (2) of that section “on or before the 1st day of November following that year of assessment” were substituted for “within 15 days from the end of the year of assessment”.

• (7) Part 16 shall not apply in relation to any shares which form part of a relevant investment.

839 Limits to special investments. [FA93 s16; FA94 s34(c) to (g)]

839.—(1) Subject to subsection (2), an individual shall not at the same time have a beneficial interest in investments of more than one of the following classes of investment—

• (a) special savings accounts within the meaning of section 256(1) (such an account being referred to subsequently in this section as a “special savings account”);

• (b) special investment policies within the meaning of section 723(1);

• (c) special investment units within the meaning of section 737;

• (d) special portfolio investment accounts within the meaning of section 838.

• (2)
• (a) An individual, whether married or not, who does not have a joint interest in an investment of a class mentioned in subsection (1) may have a beneficial interest, that is not a joint interest, in 2 such investments, being a special savings account and an investment of a class mentioned in paragraph (b), (c) or (d) of that subsection, during a period throughout which—

• (i) as respects the special savings account, the condition specified in section 264(1) (i) would be satisfied if “£25,000” were substituted for “£50,000” in that condition, or