TAXES CONSOLIDATION ACT, 1997

but this paragraph shall not apply to any interest in respect of any relevant principal advanced after the time when the total of the amounts of relevant principal to which this paragraph applies, advanced by all lenders who have made such advances, exceeds £170,000,000.

• (d) For the purposes of this subsection and subsections (9) and (10)—

• (i) relevant principal advanced by a company at any time on or after a day includes any relevant principal advanced on or after that day to a borrower under an agreement entered into before that day,

• (ii) where on or after the 6th day of May, 1993, a period of repayment of relevant principal advanced by a company is extended (whether or not the right to such an extension arose out of the terms of the agreement to advance the relevant principal), the company shall be treated as having—

• (I) received repayment of the relevant principal, and

• (II) advanced a corresponding amount of relevant principal,

on the date on which apart from the extension the relevant principal fell to be repaid, and

• (iii) where at any time after an amount of relevant principal is specified in a list in accordance with paragraph (c)(iv) or subsection (9)(c)(ii) or (10)(b)(ii) a company advances, or is treated as advancing, to a borrower relevant principal the interest in respect of which is treated as a distribution by virtue only of paragraph (c) or subsection (9)(c) or (10)(b), the amount of relevant principal specified in the list shall be treated as reduced by the amount of relevant principal so advanced, or treated as advanced, and the amount so reduced shall be treated as the amount specified in that list.

• (e) For the purposes of this subsection and subsections (9) and (10), where a company which has on or after the 31st day of January, 1990, advanced relevant principal to a borrower under the terms of an agreement and, under the terms of that or any other agreement, the company assigns to another company part or all of its rights and obligations under the first-mentioned agreement in relation to the relevant principal, such assignment shall be deemed not to have taken place.

• (9)
• (a) Notwithstanding subsections (5), (7) and (8), where at any time on or after the 31st day of December, 1991, the current amounts of relevant principal advanced by a company in respect of relevant securities held directly or indirectly by the company at that time is in excess of a limit, being a limit equal to 40 per cent of the total of the amounts of relevant principal advanced by the company in respect of the relevant securities held directly or indirectly by the company on the 12th day of April. 1989, then, any interest paid to the company in respect of relevant principal advanced by the company on or after the 31st day of December, 1991, being relevant principal which is included in the current amounts of relevant principal, shall not be treated as a distribution for the purposes of the Corporation Tax Acts in the hands of the company.

• (b) (i) Where the total of the amounts of relevant principal advanced by a company in respect of relevant securities held directly or indirectly by the company at any time on or after the 31st day of December, 1991, is less than the limit referred to in paragraph (a), that paragraph shall apply as if that limit were the total of the amounts of relevant principal so advanced as at that time unless the company proves that it has as far as possible, at all times on or after the 31st day of December, 1991, advanced to borrowers relevant principal in respect of the interest on which paragraph (a) does not, or would not, apply by virtue of paragraph (c).

• (ii) Where at any time during the period commencing on the 18th day of April, 1991, and ending immediately before the 31st day of December, 1991, an amount of relevant principal which was advanced to a borrower, being a company which carries on one or more trading operations (within the meaning of section 445(1)), is repaid, this section shall apply as if—

• (I) references in subparagraph (i) and in paragraph (a) to the 31st day of December, 1991, were references to the day on which the amount is repaid, and

• (II) during that period—

• (A) the reference in subparagraph (i) to relevant principal in respect of the interest on which paragraph (a) does not, or would not, apply by virtue of paragraph (c) were a reference to such principal in respect of the interest on which paragraph (b) of subsection (8) does not, or would not, apply by virtue of paragraph (c) of that subsection, and

• (B) the reference in paragraph (c) of subsection (8) to paragraph (b) of that subsection were a reference to paragraph (a).

• (c) Where apart from this paragraph any part of any interest paid to a company in respect of relevant principal advanced by the company on or after the 31st day of December, 1991, would not be treated as a distribution for the purposes of the Corporation Tax Acts in the hands of the company by virtue only of paragraph (a), then, subject to subsection (11), that paragraph shall not apply in relation to so much of that interest as is paid if—

• (i) the specified trade is a trade which the borrower commenced to carry on after the 31st day of January, 1990, or is a specified trade of the borrower in respect of which the borrower is committed, under a business plan approved by the Industrial Development Authority, the Shannon Free Airport Development Company Limited or Údarás na Gaeltachta, to the creation of additional employment,

• (ii) the specified trade of the borrower was selected by the Industrial Development Authority for inclusion in a list, approved by the Minister for Industry and Commerce and the Minister for Finance, being a list specifying a particular amount of relevant principal in respect of each trade which amount is considered to be essential for the success of that trade, and

• (iii) the borrower or a company connected with the borrower is not a company which commenced to carry on relevant trading operations (within the meaning of section 446) after the 20th day of April, 1990, or intends to commence to carry on such trading operations.

• (10)
• (a) Notwithstanding subsections (5) and (7) to (9), any interest paid to a company in respect of relevant principal advanced by the company on or after the 20th day of December, 1991, shall not be treated as a distribution for the purposes of the Corporation Tax Acts in the hands of the company.

• (b) Where apart from this paragraph any interest paid to a company in respect of relevant principal advanced by the company on or after the 20th day of December, 1991, would not be treated as a distribution for the purposes of the Corporation Tax Acts in the hands of the company by virtue only of paragraph (a), then, subject to subsection (11), that paragraph shall not apply in relation to so much of that interest as is paid for a specified period in respect of relevant principal advanced and which was, at the time the relevant principal was advanced, specified in the list referred to in subparagraph (ii) if—

• (i) the specified trade is a trade which the borrower commenced to carry on after the 31st day of January, 1990, or is a specified trade of the borrower in respect of which the borrower is committed, under a business plan approved by the Industrial Development Authority, the Shannon Free Airport Development Company Limited or Údarás na Gaeltachta, to the creation of additional employment,

• (ii) before the 25th day of March, 1992, the specified trade of the borrower was included in a list prepared by the Industrial Development Authority and approved before that day by the Minister for Industry and Commerce and the Minister for Finance, being a list specifying a particular amount of relevant principal in respect of each trade which amount is considered to be essential for the success of that trade, and

• (iii) the borrower is not a company which carries on relevant trading operations (within the meaning of section 446) or intends to carry on such trading operations.

• (11) Subsections (9)(c) and (10)(b) shall not apply to any interest in respect of any relevant principal advanced after the time when the total of the amounts of relevant principal to which those subsections apply, advanced by all lenders who have made such advances, exceeds the aggregate of—

• (a) £250,000,000, and

• (b) the excess, if any, of £170,000,000 over the total of the amounts of relevant principal to which subsection (8)(c) applies advanced by all lenders who have made such advances.

• (12)
• (a) In this subsection, “scheduled repayment date”, in relation to any relevant principal, means the date on which that relevant principal is to be repaid under the terms of the agreement to advance that relevant principal.

• (b) Where at any time before the 7th day of December, 1993—

• (i) relevant principal (in this subsection referred to as “the first-mentioned relevant principal”), the interest in respect of which was treated as a distribution by virtue only of subsection (8)(c), (9)(c) or (10)(b), advanced by a company to a borrower was repaid by the borrower before the scheduled repayment date, and

• (ii) a further amount or further amounts of relevant principal, the interest in respect of which is to be treated as a distribution by virtue only of subsection (8)(c), (9)(c) or (10)(b), was or were advanced to that borrower,

then, subsection (8)(d)(iii) shall not apply in relation to so much of—

• (I) the further amount of relevant principal advanced as does not exceed the amount of relevant principal repaid, or

• (II) where there are more further amounts advanced than one, the aggregate of the further amounts of relevant principal advanced as does not exceed the relevant principal repaid.

• (c) Where by virtue of paragraph (b) subsection (8)(d)(iii) does not apply in relation to any amount of relevant principal advanced by a company, the company shall be treated as having—

• (i) received a repayment of that amount of relevant principal, and

• (ii) advanced a corresponding amount of relevant principal,

on the scheduled repayment date of the first-mentioned relevant principal.

• (d) For the purposes of this subsection, where there are more further advances of relevant principal than one, the amount to which subsection (8)(d)(iii) does not apply shall be referable as far as possible to an earlier rather than a later such further advance.

• (e) Notwithstanding paragraphs (b) to (d), interest which but for this paragraph would not be treated as a distribution by virtue only of subsection (8)(d)(iii) may be treated as a distribution if it is paid in respect of relevant principal advanced before the 7th day of December, 1993.

• (13)
• (a) In this subsection, “relevant period” means a period which commences at a time at which, in accordance with the terms of the agreement under which relevant principal secured by a relevant security is advanced, an amount representing the interest for the use of the relevant principal is to be paid, and ends at a time immediately before the next time at which such an amount is to be paid.

• (b) Interest paid to a company in respect of—

• (i) relevant principal denominated in a currency other than Irish currency, and

• (ii) a relevant period which begins on or after the 30th day of January, 1991,

shall not be a distribution for the purposes of the Corporation Tax Acts in the hands of the company if, at any time during that period, the rate on the basis of which interest is computed exceeds 80 per cent of the rate known as the 3 month Dublin Interbank Offered Rate on Irish pounds (in this subsection referred to as “the 3 month Dublin Interbank Offered Rate”) a record of which is maintained by the Central Bank of Ireland.

• (c) Paragraph (b) shall not apply to any interest paid to a company in respect of relevant principal advanced by the company—

• (i) before the 30th day of January, 1991, under an agreement entered into before that day if on that day the rate on the basis of which interest in respect of the relevant security is to be computed exceeds 80 per cent of the 3 month Dublin Interbank Offered Rate; but this subparagraph shall not apply as respects any relevant period commencing on or after the 20th day of December, 1991, if in that relevant period that rate exceeds the rate on the basis of which interest would have been computed if the relevant principal had continued to be denominated in the currency in which it was denominated on the 30th day of January, 1991,

• (ii) on or after the 30th day of January, 1991—

• (I) which is included in a list referred to in subsection (8)(c)(iv), (9)(c)(ii) or (10)(b)(ii), and

• (II) for the purposes of a specified trade of a borrower who is certified by the Minister for Enterprise, Trade and Employment as having received an undertaking that the interest would be treated as a distribution;

but this subparagraph shall not apply as respects any relevant period commencing on or after the 20th day of December, 1991, if in that relevant period the rate on the basis of which interest in respect of the relevant security is to be computed exceeds—

• (A) a rate approved by the Minister for Finance in consultation with the Minister for Enterprise, Trade and Employment, or

• (B) where it is lower than the rate so approved and the relevant principal was advanced on or after the 30th day of January, 1991, and before the 20th day of December, 1991, the rate which would have applied if the relevant principal had continued to be denominated in the currency in which it was denominated when it was advanced,

• (iii) on or after the 18th day of April, 1991, where the rate on the basis of which that interest is computed exceeds 80 per cent of the 3 month Dublin Interbank Offered Rate by reason only that the relevant principal advanced is denominated in sterling, or

• (iv) to a borrower which is a company carrying on one or more trading operations within the meaning of section 445(1).

134 Limitation on meaning of “distribution” in relation to certain payments made in respect of “foreign source” finance. [CTA76 s84A(1) to (6), (9) and (10); FA84 s41; FA86 s54; FA87 s28(5)(b); FA89 s21(2)(a); FA97 s146(1) and Sch9 PtI par10(2)(a)]

134.—(1) (a) In this section—

“agricultural society” and “fishery society” have the meanings respectively assigned to them by section 443(16);

“selling by wholesale” means selling goods of any class to a person who carries on a business of selling goods of that class or uses goods of that class for the purposes of a trade or undertaking carried on by the person;

“specified trade” means, subject to paragraphs (b) and (d) and to subsection (6), a trade which consists wholly or mainly of—

• (i) the manufacture of goods, including activities which, if the borrower were to make a claim for relief in respect of the trade under Part 14, would be regarded for the purposes of that Part as the manufacture of goods, or

• (ii) the rendering of services in the course of a service undertaking in respect of which an employment grant was made by the Industrial Development Authority under section 2 of the Industrial Development (No. 2) Act, 1981.

• (b) Where the borrower mentioned in subsection (5) is a 75 per cent subsidiary of—

• (i) an agricultural society, or

• (ii) a fishery society,

“specified trade”, in that subsection, means a trade of the borrower which consists wholly or mainly of either or both of—

• (I) the manufacture of goods within the meaning of the definition of “specified trade” in paragraph (a), and

• (II) the selling by wholesale of—

• (A) where subparagraph (i) applies, agricultural products, or

• (B) where subparagraph (ii) applies, fish.

• (c) For the purposes of the definition of “specified trade” in paragraph (a) and of paragraph (b), a trade shall be regarded, as respects an accounting period, as consisting wholly or mainly of particular activities only if the total amount receivable by the borrower from sales made or, as the case may be, in payment for services rendered in the course of those activities in the accounting period is not less than 75 per cent of the total amount receivable by the borrower from all sales made in the course of the trade in that period.

• (d) A qualifying shipping trade (within the meaning of section 407) shall not be regarded as a specified trade for the purposes of this section.

• (2) This section shall apply only where the principal secured has been advanced by a company out of money subscribed for the share capital of the company and that share capital is beneficially owned directly or indirectly by a person or persons resident outside the State.

• (3) Any interest or other distribution which—

• (a) is paid out of assets of a company (in this section referred to as “the borrower”) to another company within the charge to corporation tax, and

• (b) is so paid in respect of a security (in this section referred to as a “relevant security”) within subparagraph (ii), (iii)(I) or (v) of section 130(2)(d),

shall not be a distribution for the purposes of the Corporation Tax Acts unless the application of this subsection is excluded by subsection (4) or (5).

• (4) Subsection (3) shall not apply in a case where the consideration given by the borrower for the use of the principal secured represents more than a reasonable commercial return for the use of that principal; but, where this subsection applies, nothing in subparagraph (ii), (iii)(I) or (v) of section 130(2)(d) shall operate so as to treat as a distribution for the purposes of the Corporation Tax Acts so much of the interest or other distribution as represents a reasonable commercial return for the use of that principal.

• (5) Subsection (3) shall not apply to any interest paid by the borrower, in an accounting period of the borrower, to another company the ordinary trading activities of which include the lending of money, where—

• (a) in that accounting period the borrower carries on in the State a specified trade, and

• (b) the interest, if it were not a distribution, would be treated as a trading expense of that trade for that accounting period.

• (6)
• (a) This subsection shall apply to any interest or other distribution which apart from this subsection would be a distribution for the purposes of the Corporation Tax Acts, other than any interest or other distribution which is paid by the borrower under an obligation entered into—

• (i) before the 13th day of May, 1986, or

• (ii) before the 1st day of September, 1986, in accordance with negotiations which were in progress between the borrower and a lender before the 13th day of May, 1986.

• (b) Subsection (5) shall apply as respects any interest or other distribution to which this subsection applies as if paragraph (ii) of the definition of “specified trade” in subsection (1)(a) were deleted.

• (c) For the purposes of paragraph (a)—

• (i) an obligation shall be treated as having been entered into before a particular date only if before that date there was in existence a binding contract in writing under which that obligation arose, and

• (ii) negotiations in accordance with which an obligation was entered into shall not be regarded as having been in progress before the 13th day of May, 1986, unless on or before that date preliminary commitments or agreements in relation to that obligation had been entered into between the lender referred to in that paragraph and the borrower.

135 Distributions: supplemental. [CTA76 s87; FA91 s29]

135.—(1) (a) In this Chapter, “new consideration” means consideration not provided directly or indirectly out of the assets of the company, but does not include amounts retained by the company by means of capitalising a distribution.

• (b) Notwithstanding paragraph (a), where share capital has been issued at a premium representing new consideration, any part of that premium applied afterwards in paying up share capital shall also be treated as new consideration for that share capital, except in so far as the premium has been taken into account under section 132(3) so as to enable a distribution to be treated as a repayment of share capital.

• (2)
• (a) No consideration derived from the value of any share capital or security of a company, or from voting or other rights in a company, shall be regarded for the purposes of this Chapter as new consideration received by the company unless the consideration consists of—

• (i) money or value received from the company as a distribution,

• (ii) money received from the company as a payment which for those purposes constitutes a repayment of that share capital or of the principal secured by that security, or

• (iii) the giving up of the right to that share capital or security on its cancellation, extinguishment or acquisition by the company.

• (b) No amount shall be regarded as new consideration by virtue of subparagraph (ii) or (iii) of paragraph (a) in so far as it exceeds any new consideration received by the company for the issue of the share capital or security in question or, in the case of share capital which constituted a distribution on issue, the nominal value of that share capital.

• (3) Where 2 or more companies enter into arrangements to make distributions to each other's members, all parties concerned may for the purposes of this Chapter be treated as if anything done by any of those companies had been done by any other, and this subsection shall apply however many companies participate in the arrangements.

• (4)
• (a) In this Chapter and in section 137, “in respect of shares in the company” and “in respect of securities of the company”, in relation to a company which is a member of a 90 per cent group, mean respectively in respect of shares in that company or any other company in the group and in respect of securities of that company or any other company in the group.

• (b) Without prejudice to section 130(2)(b) as extended by paragraph (a), in relation to a company which is a member of a 90 per cent group, “distribution” includes anything distributed out of assets of the company (whether in cash or otherwise) in respect of shares in or securities of another company in the group.

• (c) Nothing in this subsection shall require a company to be treated as making a distribution to any other company which is in the same group and is resident in the State.

• (d) For the purposes of this subsection, a principal company and all its 90 per cent subsidiaries form a 90 per cent group, and “principal company” means a company of which another company is a subsidiary.

• (e) Nothing in this subsection shall require any company which is a subsidiary (within the meaning of section 155 of the Companies Act, 1963) of another company to be treated as making a distribution where it acquires shares in the other company in accordance with section 9(1) of the Insurance Act, 1990.

• (5) A distribution shall be treated under this Chapter as made, or consideration as provided, out of assets of a company if the cost falls on the company.

• (6) In this Chapter and in section 137, “share” includes stock and any other interest of a member in a company.

• (7) References in this Chapter to issuing share capital as paid up apply also to the paying up of any issued share capital.

• (8) For the purposes of this Chapter and of section 137, “security” includes securities not creating or evidencing a charge on assets, and interest paid by a company on money advanced without the issue of a security for the advance, or other consideration given by a company for the use of money so advanced, shall be treated as if paid or given in respect of a security issued for the advance by the company.

• (9) Where securities are issued at a price less than the amount repayable on them and are not quoted on a recognised stock exchange, the principal secured shall not be taken for the purposes of this Chapter to exceed the issue price unless the securities are issued on terms reasonably comparable with the terms of issue of securities so quoted.

• (10) For the purposes of this Chapter and of section 137, a thing shall be regarded as done in respect of a share if it is done to a person as being the holder of the share, or as having at a particular time been the holder of the share, or is done in pursuance of a right granted or offer made in respect of a share, and anything done in respect of shares by reference to share holdings at a particular time shall be regarded as done to the then holder of the shares or the personal representatives of any shareholder then dead.

• (11) Subsection (10) shall apply in relation to securities as it applies in relation to shares.

CHAPTER 3 Distributions and tax credits — general

136 Tax credit for certain recipients of distributions. [CTA76 s88; FA94 s27(b); FA97 s37 and Sch2 Par1]

136.—(1) Where a company resident in the State makes a distribution, the recipient of the distribution shall, subject to the Tax Acts, be entitled to a tax credit under this section (in the Tax Acts referred to as a “tax credit”).

• (2) The tax credit in respect of a distribution shall be available for the purposes specified in the Tax Acts and shall, subject to any express provision to the contrary, be an amount determined by the formula—

D ×	A _ 100 − A

where—

A is the standard credit rate per cent for the year of assessment in which the distribution is made, and

D is the amount or value of the distribution.

• (3) A company resident in the State which is entitled to a tax credit in respect of a distribution may claim to have the amount of the tax credit paid to it if—

• (a) the company is wholly exempt from corporation tax or is only not exempt in respect of trading income, or

• (b) the distribution is one in relation to which express exemption (otherwise than by section 129) is given, whether specifically or by virtue of a more general exemption from tax, under any provision of the Tax Acts.

• (4) A person, not being a company resident in the State, who is entitled to a tax credit in respect of a distribution may claim—

• (a) to have the credit set against the income tax chargeable on such person's income for the year of assessment in which the distribution is made, and

• (b) where the credit exceeds that income tax, and the person is—

• (i) resident in the State, or

• (ii) entitled under section 1033 to a tax credit in respect of the distribution,

to have the excess paid to such person.

• (5)
• (a) In this subsection, “trust resident in the State” means a trust administered under the law of the State, not being a trust the general administration of which is ordinarily carried on outside the State and the trustees or a majority of the trustees of which are resident or ordinarily resident outside the State.

• (b) Where a distribution mentioned in subsection (1) is, or is to be treated as, or is deemed to be under any provision of the Tax Acts, income of a person other than the recipient, that person shall be treated for the purposes of this section as receiving the distribution (and accordingly the question whether that person is entitled to a tax credit in respect of the distribution shall be determined by reference to where that person and not the actual recipient is resident), and where any such distribution is income of a trust resident in the State, the trustees shall be entitled to a tax credit in respect of such distribution if no other person is to be treated for the purposes of this section as receiving the distribution.

137 Disallowance of reliefs in respect of bonus issues. [CTA76 s89]

137.—(1) This section shall apply where any person (in this section referred to as “the recipient”) receives an amount treated as a distribution by virtue of—

• (a) paragraph (c) or (d) of section 130(2),

• (b) section 131, or

• (c) section 132(2)(a),

and, in this section, a distribution within paragraph (a), (b) or (c) is referred to as a “bonus issue”, and “relevant tax credit”, in relation to a bonus issue, means the tax credit to which the recipient of the bonus issue becomes entitled under section 136 in respect of the bonus issue.

• (2) Subject to subsection (5), where the recipient is entitled by reason of—

• (a) any exemption from tax,

• (b) the setting-off of losses against profits or income, or

• (c) the payment of interest,

to recover tax in respect of any distribution which the recipient has received, no account shall be taken, for the purposes of any such exemption, set-off or payment of interest, of any bonus issue or relevant tax credit which the recipient has received.

• (3) Subject to subsection (5), a bonus issue and the relevant tax credit shall be treated as not being franked investment income within the meaning of section 156.

• (4) Subject to subsection (5), the relevant tax credit relating to a bonus issue shall not be available to set against any income tax which the recipient is entitled to deduct under section 237 or with which the recipient is chargeable by virtue of section 238.

• (5) Nothing in subsections (2) to (4) shall affect the proportion (if any) of any bonus issue made in respect of any shares or securities which, if that bonus issue were declared as a dividend, would represent a normal return to the recipient on the consideration provided by the recipient for the relevant shares or securities, that is, those in respect of which the bonus issue was made and, if those securities are derived from shares or securities previously acquired by the recipient, the shares or securities which were previously acquired; and nothing in those subsections shall affect the like proportion of the relevant tax credit relating to that bonus issue.

• (6) For the purposes of subsection (5)—

• (a) if the consideration provided by the recipient for any of the relevant shares or securities was in excess of their market value at the time the recipient acquired them, or if no consideration was provided by the recipient for any of the relevant shares or securities, the recipient shall be taken to have provided for those shares or securities consideration equal to their market value at the time the recipient acquired them, and

• (b) in determining whether an amount received by means of dividend exceeds a normal return, regard shall be had to the length of time before the receipt of that amount that the recipient first acquired any of the relevant shares or securities and to any dividends and other distributions made in respect of the relevant shares or securities during that time.

138 Treatment of dividends on certain preference shares. [FA84 s42(1), (2) and (3); FA 89 s26]

138.—(1) In this section—

“preference shares” does not include preference shares—

• (a) which are quoted on a stock exchange in the State,

• (b) which are not so quoted but which carry rights in respect of dividends and capital comparable with those general for fixed-dividend shares quoted on a stock exchange in the State, or

• (c) which are non-transferable shares issued on or after the 6th day of April, 1989, by a company in the course of carrying on relevant trading operations within the meaning of section 445 or 446, to a company—

• (i) none of the shares of which is beneficially owned, whether directly or indirectly, by a person resident in the State, and

• (ii) which, if this paragraph had not been enacted, would not be chargeable to corporation tax in respect of any profits other than dividends which would be so chargeable by virtue of this section;

“shares” includes stock.

• (2) This section shall apply to any dividend which—

• (a) is paid by a company (in this section referred to as “the issuer”) to another company (in this section referred to as “the subscriber”) within the charge to corporation tax, and

• (b) is so paid in respect of preference shares of the issuer.

• (3) Notwithstanding any provision of the Tax Acts—

• (a) the subscriber shall not be entitled to a tax credit in respect of a dividend to which this section applies, and

• (b) the dividend shall be chargeable to corporation tax under Case IV of Schedule D.

139 Dividends and other distributions at gross rate or of gross amount. CTA76 s178; FA78 s28(6); FA97 s37 and Sch2 par1]

139.—(1) Where any right or obligation created before the 6th day of April, 1976, is expressed by reference to a dividend at a gross rate or of a gross amount, that right or obligation shall, in relation to a dividend payable on or after that date, take effect as if the reference were to a dividend of an amount determined by the formula—

D −	A × D _____ 100

where—

A is the standard credit rate per cent for the year of assessment in which the dividend is paid, and

D is an amount equal to a dividend at that gross rate or of that gross amount.

• (2) Subsection (1) shall apply with the necessary modifications to a dividend partly at a gross rate or of a gross amount and shall apply to any distribution other than a dividend as it applies to a dividend.

CHAPTER 4 Distributions out of certain exempt profits or gains or out of certain relieved income

140 Distributions out of profits or gains from stallion fees, stud greyhound services fees and occupation of certain woodlands. [CTA76 s93; FA96 s25(3); FA97 s146(1) and Sch9 par10(3)]

140.—(1) In this section—

“exempt profits” means profits or gains which by virtue of section 231, 232 or 233 were not charged to tax;

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

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

• (3)
• (a) So much of any distribution as has been made out of exempt profits—

• (i) shall, where the recipient of that distribution is a company, be deemed for the purposes of the Corporation Tax Acts to be exempt profits of the company, and

• (ii) shall not be regarded as income for any purpose of the Income Tax Acts.

• (b) Notwithstanding section 136, the recipient of any distribution, including part of a distribution treated under subsection (2) as a distribution, made out of exempt profits 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 139 relates and the distribution is made out of exempt profits, 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 (2) shall apply to a supplementary distribution under this subsection as if that supplementary distribution were a distribution made wholly out of exempt profits.

• (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 exempt profits, section 152 shall apply to the company so that the statements provided for by that section 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 exempt profits.

• (6) In relation to any supplementary distribution under subsection (4), section 152 shall apply to the company so that the statement required by subsection (1) of 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 (within the meaning of section 144(8)) of that period to the extent of that income and, in relation to the excess of the distribution over that income, out of the most recently accumulated income.

• (8) Subsections (6) and (7) of section 145 shall apply for the purposes of this section as they apply for the purposes of that section.

141 Distributions out of income from patent royalties. [CTA76 s170; FA92 s19(2); FA96 s32(2) and (3)(b); FA97 s146(1) and Sch9 par10(9)]

141.—(1) In this section—

“disregarded income” means—

• (a) as respects distributions made out of specified income accruing to a company on or after the 28th day of March, 1996—

• (i) income from a qualifying patent which by virtue of section 234(2) has been disregarded for the purposes of income tax, and

• (ii) income from a qualifying patent which by virtue of section 234(2) and section 76(6) has been disregarded for the purposes of corporation tax,

but does not include income (in this section referred to as “specified income”) from a qualifying patent (within the meaning of section 234) which would not be income from a qualifying patent if paragraph (a) of the definition of “income from a qualifying patent” in section 234(1) had not been enacted, and

• (b) as respects any other distributions—

• (i) income which by virtue of section 234(2) has been disregarded for the purposes of income tax, and

• (ii) income which by virtue of section 234(2) and section 76(6) has been disregarded for the purposes of corporation tax;

“eligible shares”, in relation to a company, means shares forming part of the ordinary share capital of the company which—

• (a) are fully paid up,

• (b) carry no present or future preferential right to dividends or to the company's assets on its winding up and no present or future preferential right to be redeemed, and

• (c) are not subject to any different treatment from the treatment which applies to all shares of the same class, in particular different treatment in respect of—

• (i) the dividend payable,

• (ii) repayment,

• (iii) restrictions attaching to the shares, or

• (iv) any offer of substituted or additional shares, securities or rights of any description in respect of the shares;

“other profits” includes a dividend or other distribution of a company 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 2 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, subject to subsection (4)(a), not be regarded as income for any purpose of the Income Tax Acts, and

• (ii) shall, where the recipient of that distribution is a company and the distribution is in respect of eligible shares, 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) Subsection (3)(a)(i) shall not apply to any distribution received by a person unless it is a distribution—

• (i) in respect of eligible shares, or

• (ii) made out of disregarded income, being income (in this subsection referred to in relation to a person as “relevant income”) which is referable to a qualifying patent in relation to which the person carried out, either solely or jointly with another person, the research, planning, processing, experimenting, testing, devising, designing, development or other similar activity leading to the invention which is the subject of the qualifying patent.

• (b) For the purposes of paragraph (a), where a distribution for an accounting period is made by a company to a person in part out of relevant income, in relation to the person, and in part out of other disregarded income, the distribution shall be treated as if it consisted of 2 distributions respectively made out of relevant income and out of other disregarded income.

• (5)
• (a) In this subsection—

“the amount of aggregate expenditure on research and development incurred by a company in relation to an accounting period” means the amount of expenditure on research and development activities incurred in the State by the company in the accounting period and the previous 2 accounting periods; but, where in an accounting period a company incurs expenditure on research and development activities and not less than 75 per cent of that expenditure was incurred in the State, all of that expenditure shall be deemed to have been incurred in the State;

“the amount of the expenditure on research and development activities”, in relation to expenditure incurred by a company in an accounting period, means non-capital expenditure incurred by the company, being the aggregate of the amounts of—

• (i) such part of the emoluments paid by the company to employees of the company engaged in carrying out research and development activities related to the company's trade as is laid out for the purposes of those activities,

• (ii) expenditure incurred by the company on materials or goods used solely by the company in the carrying out of research and development activities related to the company's trade, and

• (iii) a sum paid to another person, not being a person connected with the company, in order that such person may carry out research and development activities related to the company's trade,

but, where the company (in this definition referred to as “the first company”) is a member of a group, then, for the purposes of this section, the amount of expenditure on research and development activities incurred in an accounting period by another company which in the accounting period is a member of the group shall, on a joint election in writing being made on that behalf by the first company and the other company, be treated as being expenditure incurred on research and development activities in the accounting period by the first company and not by the other company;

“research and development activities” has the same meaning as in section 766.

• (b) For the purpose of this subsection—

• (i) 2 companies shall be deemed to be members of a group if both companies are wholly or mainly under the control of the same individual or individuals or if one company is a 75 per cent subsidiary of another company or both companies are 75 per cent subsidiaries of a third company and, in determining whether one company is a 75 per cent subsidiary of another company, the other company shall be treated as not being the owner of—

• (I) any share capital which it owns directly in a company if a profit on sale of the shares would be treated as a trading receipt of its trade, or

• (II) any share capital which it owns indirectly and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt;

• (ii) a company shall be wholly or mainly under the control of an individual or individuals if not less that 75 per cent of the ordinary share capital of the company is owned directly or indirectly by the individual or, as the case may be, by individuals each of whom owns directly or indirectly part of that share capital;

• (iii) sections 412 to 418 shall apply for the purposes of this paragraph as they apply for the purposes of Chapter 5 of Part 12 and, where 2 companies are deemed to be members of a group by reason that both companies are wholly or mainly under the control of the same individual or individuals, those sections shall apply as they would apply for the purposes of that Chapter if the references in those sections to a parent company included a reference to an individual or individuals who hold shares in a company.

• (c) Where for an accounting period a company makes one or more distributions out of specified income which accrued to the company on or after the 28th day of March, 1996, so much of the amount of that distribution, or the aggregate of such distributions, as does not exceed the amount of aggregate expenditure on research and development incurred by the company in relation to the accounting period shall be treated as a distribution made out of disregarded income.

• (d) (i) Notwithstanding paragraph (c) but subject to subparagraph (ii), if in an accounting period the beneficial recipient (in this paragraph referred to as “the recipient”) of the specified income shows in writing to the satisfaction of the Revenue Commissioners that the specified income is income from a qualifying patent in respect of an invention which—

• (I) involved radical innovation, and

• (II) was patented for bona fide commercial reasons and not primarily for the purpose of avoiding liability to taxation,

the Revenue Commissioners shall, after consideration of any evidence in relation to the matter which the recipient submits to them and after such consultations (if any) as may seem to them to be necessary with such persons as in their opinion may be of assistance to them, determine whether all distributions made out of specified income accruing to the recipient for that accounting period and all sub sequent accounting periods shall be treated as distributions made out of disregarded income and the recipient shall be notified in writing of the determination.

• (ii) A recipient aggrieved by a determination of the Revenue Commissioners under subparagraph (i) may, by notice in writing given to the Revenue Commissioners within 30 days of the date of notification advising of the determination, appeal to the Appeal Commissioners and the Appeal Commissioners shall hear and determine the appeal made to them as if it were an appeal against an assessment to income tax, and the provisions of the Income Tax Acts 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.

• (e) The Revenue Commissioners may nominate any of their officers to perform any acts and discharge any functions authorised by this subsection to be performed or discharged by the Revenue Commissioners, and references in this subsection to the Revenue Commissioners shall, with any necessary modifications, be construed as including references to an officer so nominated.

• (6)
• (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 139 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.

• (7) 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, section 152 shall apply to the company so that the statements provided for by that section 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.

• (8) In relation to any supplementary distribution under subsection (6), section 152 shall apply to the company so that the statement required by subsection (1) of that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.

• (9) 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 (within the meaning of section 144(8)) 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.

• (10) Subsections (6) and (7) of section 145 shall apply for the purposes of this section as they apply for the purposes of that section.

142 Distributions out of profits of certain mines. [CTA76 s81]

142.—(1) In this section—

“exempted income” means income in respect of which a company has obtained relief under—

• (a) the Finance (Profits of Certain Mines) (Temporary Relief from Taxation) Act, 1956, or

• (b) Chapter II (Profits of Certain Mines) of Part XXV of the Income Tax Act, 1967;

“other income” means income of a company which is not exempted income.

• (2) Where a distribution for an accounting period is made by a company wholly out of exempted income, the distribution shall not be regarded as income for any purpose of the Income Tax Acts and, notwithstanding section 136, the recipient of the distribution shall not be entitled to a tax credit in respect of it.

• (3) Where a distribution for an accounting period is made by a company in part out of exempted income and in part out of other income, the distribution shall be treated as if it consisted of 2 distributions respectively made out of exempted income and other income, and subsection (2) shall apply to such part of the distribution as is made out of exempted income as it applies to a distribution made wholly out of exempted income.

• (4) Any distribution, including part of a distribution treated under subsection (3) as a distribution, made out of exempted income shall, where the recipient is a company resident in the State, be deemed for the purposes of this section to be exempted income of the company.

• (5)
• (a) Where a company makes a distribution, including part of a distribution treated under subsection (3) as a distribution, in respect of any right or obligation to which section 139 relates and the distribution is made out of exempted 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 (2) had not been enacted.

• (b) Subsection (2) shall apply to a supplementary distribution under this subsection as if the supplementary distribution were a distribution made out of exempted income, and section 152(1) shall apply 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.

• (6) Subsections (7) and (8) of section 144 and subsections (6) and (7) of section 145 shall apply for the purposes of this section as they apply for the purposes of those sections.

• (7) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (3) as a distribution, made out of exempted income, section 152 shall apply so that the statements provided for by that section shall show, in addition to the particulars required to be given apart from this section, that the distribution is made out of exempted income.

143 Distributions out of profits from coal, gypsum and anhydrite mining operations. [CTA76 s82; FA77 s5(2) and Sch1 PtII; FA97 s37 and Sch2 par1]

143.—(1) In this section, “relieved income” means the income of a company—

• (a) on which income tax was paid at a reduced rate by virtue of—

• (i) section 395(1) of the Income Tax Act, 1967,

• (ii) section 7 or 8 of the Finance (Miscellaneous Provisions) Act, 1956, or

• (iii) section 32 of the Finance Act, 1960,

• (b) on which income tax was borne by deduction at a reduced rate under—

• (i) section 396(1) of the Income Tax Act, 1967, or

• (ii) section 9 of the Finance (Miscellaneous Provisions) Act, 1956,

or

• (c) which is franked investment income, the tax credit comprised in which has been reduced under this section.

• (2) The tax credit in respect of a distribution made wholly out of relieved income shall, notwithstanding section 136, be the amount determined by applying to the amount of the distribution the fraction—

A _ 100 − A

where A is 50 per cent of the standard credit rate per cent for the year of assessment in which the distribution is made.

• (3) Where a distribution is made in part out of relieved income and in part out of other income, the distribution shall be treated as if it consisted of 2 distributions respectively made out of relieved income and out of other income, and the tax credit in respect of each such distribution shall be calculated in accordance with subsection (2) and section 136 respectively.

• (4) Any distribution, including part of a distribution treated under subsection (3) as a distribution, made out of relieved income shall, where the recipient is a company resident in the State, be deemed for the purposes of this section to be relieved income of the company.

• (5) Subject to subsection (7), for the purposes of the Tax Acts, a distribution made by a company out of relieved income shall be treated as representing income equal to the aggregate of the amount or value of that distribution and the amount of the tax credit in respect of it calculated in accordance with this section.

• (6) Where for a year of assessment the taxable income of an individual which is chargeable at the standard rate includes income represented by distributions made out of relieved income, the individual's liability to income tax in respect of the income represented by such distributions shall be an amount equal to the tax on that income calculated at 50 per cent of the standard rate for the year of assessment in which the distributions were made.

• (7) Where for a year of assessment the taxable income of an individual which is chargeable at the higher rate includes income represented by distributions made out of relieved income, the individual's liability to income tax at the higher rate in respect of the income represented by such distributions shall be an amount equal to the tax, calculated at the higher rate for the year of assessment in which the distributions were made, on the income reduced by 50 per cent, and credit shall be given against that tax of an amount equal to tax at the standard credit rate for that year on the amount of the income as so reduced.

• (8) Where a company makes a distribution, including part of a distribution treated as a distribution under subsection (3), in respect of any right or obligation to which section 139 relates and the tax credit in respect of that distribution is calculated in accordance with subsection (2), then, the company shall make a supplementary distribution of an amount equal to the excess of the tax credit which would have applied to the distribution if this section had not been enacted over the amount of the tax credit which in accordance with subsection (2) applies to the distribution, and the person to whom the distribution and the supplementary distribution are made shall be regarded as having received one distribution consisting of the aggregate of the distribution and the supplementary distribution.

• (9) Notwithstanding section 136, the recipient of a supplementary distribution under subsection (8) shall not be entitled to a tax credit in respect of such supplementary distribution, and section 152(1) shall apply 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.

• (10) Subsections (7) and (8) of section 144 and subsections (6) and (7) of section 145 shall apply for the purposes of this section as they apply for the purposes of those sections.

• (11) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (3) as a distribution, made by a company out of relieved income, section 152 shall apply so that the statements provided for by that section shall show, in addition to the particulars required to be given apart from this section, that the distribution is made out of relieved income and the amount of the tax credit which would apply in respect of the distribution if it were not made out of relieved income.

144 Distributions out of profits from trading within Shannon Airport. [CTA76 s76(1), (2)(a)(ii) and (b) and (3) to (8); FA92 s35(b); FA97 s146(1) and (2), Sch9 PtI par10(1) and PtII]

144.—(1) In this section—

“exempted trading operations” means trading operations which were exempted trading operations for the purposes for Part V of the Corporation Tax Act, 1976;

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

• (2) Where a distribution for an accounting period is made by a body corporate in part out of income from exempted trading operations and in part out of other profits, the distribution shall be treated as if it consists of 2 distributions respectively made out of income from exempted trading operations and out of other profits.

• (3)
• (a) So much of any distribution as has been made out of income from exempted trading operations shall, where the recipient of that distribution is a body corporate, be deemed for the purposes of this section to be income from exempted trading operations.

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

• (4)
• (a) Where a body corporate 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 139 relates and the distribution is made out of income from exempted trading operations, the body corporate 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 income from exempted trading operations.

• (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 body corporate out of income from exempted trading operations, section 152 shall apply to the body corporate so that the statements provided for by that section 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 income from exempted trading operations.

• (6) In relation to any supplementary distribution under subsection (4), section 152(1) shall apply to the body corporate 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 body corporate 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 of that period to the extent of that income and in relation to the excess of the distribution over that income out of the most recently accumulated income.

• (8) For the purposes of subsection (7), the distributable income of a company for an accounting period shall be an amount determined by the formula—

(R − S) + T

where R, S and T have the same meanings respectively as in section 147(1)(a).

• (9) Subsections (6) and (7) of section 145 shall apply for the purposes of this section as they apply for purposes of that section.

145 Distributions out of profits from export of certain goods. [CTA76 s28(8), s64 and s66A(1) and (2); FA78 s28(4); FA80 s42(6); FA82 s60(1); FA92 s35(a); FA97 s37 and Sch2 par1 and par3(3)]

145.—(1) This section shall apply to a distribution (in this section referred to as a “relevant distribution”) made or deemed to have been made by a company for an accounting period wholly or in part out of—

• (a) the company's income for the accounting period the corporation tax in respect of which has been reduced under Part IV of the Corporation Tax Act, 1976, or

• (b) a distribution or distributions received by the company in the accounting period in respect of which the tax credit is determined in accordance with this section.