Advanced Business Taxes
Lecture 3
© Irish Tax Institute 2011
ABT – Lecture Plan
27 November
© Irish Tax Institute 2011
Chapters 8-9 inclusive
Taxation Issues Inbound to
Ireland
Taxation Issues Outbound
from Ireland
ABT – Lecture Goals
Understand basis of Irish charge
Identify Irish tax issues on repatriation of profits from
Ireland including migration
Understand and apply the Irish tax treatment on
inbound interest/royalties, foreign branch profits and
dividends from both Treaty and non-Treaty jurisdictions
to include Irish taxation and credit for foreign taxes
 Understand and apply Irish participation exemption
regime for chargeable gains
Compare and contrast branches, subs and
representative offices
Understand key relief available for intra-group
financing including associated anti-avoidance provisions
© Irish Tax Institute 2011
Recap on Last Week - Quiz
 Name three scenarios where Irish legislation, EU
Directives and Double Tax Treaties may interact
 Give the specific legislative references
 Why would you rather go for EU Directive Relief
as apposed to domestic or treaty relief?
 How do the conditions for domestic, treaty or EU
directive relief vary?
 Name 4 ways a company can avoid withholding
tax on interest?
© Irish Tax Institute 2011
Recap on Last Week - Quiz
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What is meant by transfer pricing?
Name 5 methods for determining transfer price?
What is a correlative adjustment
Describe any transfer pricing provisions of a
double tax treaty?
 Give 5 examples of a branch and 3 examples of
a non-branch activity
 What is meant by “thin capitalisation”
 Name three ways a double tax treaty can relief
income from double tax?
© Irish Tax Institute 2011
International Tax
Chapter 8
Taxation Issues for companies
setting up in Ireland
(Inbound investment)
© Irish Tax Institute 2011
Companies coming to Ireland
 How is a company coming to Ireland taxed?
– Is it opening a branch in Ireland, creating a new
subsidiary in Ireland or migrating its residence to
Ireland?
– What type of income will it have? Trading, non trading
(Noddy), receipt of interest, royalties, dividends,
chargeable gains?
– What is the taxation in Ireland but also what
withholding tax will apply on the repatriation of this
profit abroad?
– In what way is the income relieved from DT?
© Irish Tax Institute 2011
Repatriation of Profits from
Ireland
 Key tax issue prior to investment is tax efficiency of
profit repatriation – what is the tax cost of bringing
profits “home”?
 Profit repatriation encompasses interest, royalties,
dividends, capital distributions – can also include
arm’s length recharging for services rendered
 Marginal taxation can arise due to
 Higher rates of tax in home jurisdiction and/or nonavailability of credit for Irish tax (including
underlying tax in case of dividends)
 Un-creditable WHT suffered/ domestic exemption
such that WHT final tax cost
© Irish Tax Institute 2011
International Taxation
Recap – Basis of Charge
S.26(1) – Irish Res Co chargeable to CT on worldwide profits
- income and chargeable gains
S.25(2) – Non-resident Co with Irish branch/agency
chargeable to CT in respect of
trading income from the branch/agency (non-trading
branch income outside of scope of corporation tax)
income from property of the branch/agency
chargeable gains from disposal of branch/agency assets
Non Irish resident Co with no Irish branch/agency chargeable
to Irish income tax on Irish source income and chargeable to
CGT on disposal of specified assets (S.29)
© Irish Tax Institute 2011
Ireland as jurisdiction to
repatriate profits from
 Consider a structure such that foreign company
lends to Irish operation or licences IP to Irish
operation
 Interest or royalties paid to foreign company –
repatriation of profits before corporation tax!
 Is it caught by domestic Transfer Pricing rules –
Sec 835C
– Applies to trading transactions
– Does not apply to “grandfathered transactions”
© Irish Tax Institute 2011
Repatriating Profits Abroad Cont’d
 What about withholding tax?
 General rule – Income Tax withheld 20%
– Interest paid
– Royalties
S246
S238
 WHT due with Preliminary Tax
© Irish Tax Institute 2011
Interest and Royalties Withholding Tax exemptions
S.246(3)(h) - exemption from WHT on trading interest to
Treaty residents
No exemption on payments to domestic non-banking
Irish Co unless covered by 51% group exemption S410
 S.242A – FA10 amendment extends same treatment to
patent royalties made to Treaty residents in the course of
trade/business
Extensive exemptions from DWT per S.172D
In absence of domestic legislative exemption – DTA
provides for lower/nil rate of WHT on dividends, interest
and royalties
Interest and Royalties Directive
Legislative exemption preferred due to absence of
Treaty clearance procedures – changes in this
© Irish Tax Institute 2011
Withholding Tax exemptions
(cont’d)
Form VC3 previously required certificate from the auditor
of the non-resident company certifying that it is not
controlled by Irish residents
Finance Act 2010 has removed this requirement and
instead DWT exemptions now apply in accordance with a
self-assessment system.
The declaration will endure and cover future dividends
for a period of up to six years after which a new
declaration
Note WHT exemption in Interest and Royalties Directive
© Irish Tax Institute 2011
Repatriation of Profits by way
of dividend
 No deduction for CT purposes in Ireland, hence
interest and royalties more favourable
 Dividends are extremely widely defined
 DWT applies unless domestic exemptions, (see s172)
EU Parent Sub or treaty exemption applies
 Are dividends treated as trading or non trading income
for recipient in home country?
 Is credit given in home country for WHT applied in
Ireland?
© Irish Tax Institute 2011
Repatriation of Profits from
Ireland
 Repatriation also includes S.583 capital distribution –
redemption, share buy-back, distribution in course of
winding-up
 Capital distribution different from an income
distribution S.130(1) => DWT n/a
 Capital distribution = a reduction in capital of the
company – difficult from a legal perspective
 Capital distribution = CGT event, are the shareholders
subject to CGT?
 Repatriation also achievable through migration of Irish
sub out of charge to Irish tax – migration may be
preferable in certain circumstances to
distribution/liquidation
© Irish Tax Institute 2011
S.627 – 629 CGT Exit Charges
on Migration
S.627 CGT Exit Charge on Migration - Company
ceases to be Irish resident – deemed sale &
reacquisition of all assets subject to certain key
exemptions
Allowable loss offset against allowable gains – net
gain chargeable
Exit charge n/a to “Excluded Companies” – 90%
controlled by company under control of EU/Treaty
residents (not Ireland)
Exit charge n/a where assets continue to constitute
Irish branch assets (“specified assets”)
See Task 8.2
© Irish Tax Institute 2011
S.627 – 629 CGT Exit Charges
on Migration
S.628 Election to postpone gain where Migrating Co 75%
Sub of Irish resident Co – deferred gain crystallises to the
Irish parent if within 10 years:
MigratingCo sells any of the assets with deferred gain
MigratingCo ceases to be a 75% sub of the Irish
resident Parent or the Parent ceases to be Irish resident
S.627/628 Tax unpaid within 6 months recoverable from
Co which was 75% group member in 12 month period
to migration, or
Controlling Director (S.432)
Tax recoverable within “specified period” – 3 years after
end of relevant chargeable period
© Irish Tax Institute 2011
S.627 – 629 CGT Exit Charges
on Migration
Migration to non EU/EEA country will result in
migrating company ceasing membership of Irish CGT
group
S.623 clawback of CGT group relief where
migrating Co leaves CGT group with asset within
10 years of relieved transfer
S.623 clawback should result in uplifted base-cost
for purposes of S.627 charge
S.627 exclusions not available for S.623 charge
Migration should not affect association for stamp
duty clawback purposes
© Irish Tax Institute 2011
International Tax
Chapter 9
Taxation Issues Companies
expanding outside of Ireland
(Outbound from Ireland)
© Irish Tax Institute 2011
Company expanding from Ireland
or using Ireland as HoldCo
location
 What type of income will they receive
 Foreign trade Case III or Case I
 Repatriating profits from foreign operations
– How? - Interest, Royalties, Dividends, Capital
Distributions
– Irish Domestic exemptions from WHT not
applicable
– What are foreign domestic WHT rules
– Does Tax Treaty or EU Directives offer any relief?
– Does our domestic unilateral credit relief apply?
© Irish Tax Institute 2011
Interest/Royalties
Interest/royalties taxable at 12.5% trading
income, 25% passive
DTA usually provides that interest/royalties
taxable in country of residence only unless
connected with PE in other country
Royalty payments may not fall within narrow
definition in some Treaties such that WHT applies
Where WHT correctly suffered under DTA credit
relief available per Sch24
Non-Treaty – unilateral relief for trading
interest/royalties per Sch24 9D, 9DB
© Irish Tax Institute 2011
Interest/Royalties – Credit Relief –
trading income from DTA Country –
Sch 24, para 4
 If royalty/interest arising from DTA country and is
trading income use – P X I/R turnover basis
applies per Sch24, para. 4
See pg 147 manual
Gross foreign income adjusted using “Turnover
basis” to calculate “Irish measure of foreign
income” <referred to as “Relevant Income”>
© Irish Tax Institute 2011
Interest/Royalties – Credit
Relief
Relevant income = P x I/R
P= the amount of net profits of the trade before
any deduction for foreign taxes not allowed as a
credit (i.e. net taxable Case I profits pre
deduction for uncredited tax)
I = “that income” (the foreign income on which
the foreign tax was suffered) before deducting
any expenses (i.e. gross foreign income)
R= the total amount receivable by the company
in the period in the carrying on of its trade (i.e.
Case I Turnover)
© Irish Tax Institute 2011
Interest/Royalties – Credit
Relief
Practical approach to foreign tax credit relief calc:Gross up Net Foreign Income (Relevant Income Less
Foreign Tax) at lower of Irish effective rates and Foreign
effective rates <foreign effective rate = foreign
tax/relevant income>
Credit = Grossed up NFI X Lower Effective Rates
Full Credit where FER < Irish effective rate
(12.5%),
FER > Irish effective rate – tax deduction for
uncredited tax
© Irish Tax Institute 2011
Understanding Interest/Royalty
Credit Relief
Sch 24(4)
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See example 9.1
Say Royalty received
= 40k
Say tax withheld on Royalty
= 4k
Say total profits in IreCo
= 100k
Say total Turnover in IreCo
= 800k
Royalty is deemed to contribute 5k to profits of Irish Co.
Royalty forms part of trading income – trade expenses
would have occurred, hence reduction to deemed Irish
Measure Income!
 Actual tax withheld was 4k. Effective tax rate 80%.
Regross 1k at lower of Irish and Foreign ETR = 1.143k.
 Credit is given for 1.143k, Deduction for 3,857k
© Irish Tax Institute 2011
Interest – Credit Relief – trading
interest from Non DTA Country – Sch
24, para 9D
 Calculate A – use normal method (sch 24
para 4)
 Calculation B - Foreign Tax x 87.5%
 Credit relief based on lower of A&B
© Irish Tax Institute 2011
Interest/Royalties – Credit
Relief
Onshore “pooling” for trading interest only per
Sch24,9F subject to 25% relationship – no pooling for
royalties
Uncredited foreign tax on interest offset against Irish
CT on similar Case I trading interest – no provision for
carry forward (as distinct from pooled dividends)
Part of Excess Credit relieved by deduction
Excess credit for pooling = (100% – 12.5%) X
Excess Credit (Sch 24, Paragraph 9 (3)(b))
Example 9.2
© Irish Tax Institute 2011
Interest/Royalties – Credit
Relief
Non-trading interest/royalties
Treaty relief only – no unilateral relief
Irish measure foreign income is the foreign
interest/royalty – no adjustment required – its not
Case 1 income!
 No pooling for un-credited foreign tax
© Irish Tax Institute 2011
Foreign Branch Profits
Credit in Ireland for foreign branch profits under
DTA per Sch24
Sch 24, 9DA – unilateral credit relief to IrishCo for
foreign tax on foreign branch profits
Sch24, 9FA - pooling of unrelieved foreign branch
tax against other foreign branch income – FA10
amendment provides for carry forward unrelieved tax
Irish Measure Foreign Income (IMI) – Irish taxable
profits on basis profits were calculated under Irish
tax principles => Sch24, 4.(2A) [P X I/R] Turnover
Basis not used
Use of Irish basis generally results in different FER
to actual rate of foreign tax=> FER = foreign tax/IMI
See examples Pg. 166
© Irish Tax Institute 2011
Inbound Dividends – Domestic
Taxation
Prior to FA08 inbound dividends taxable under Case
III @ 25%
FA08 introduced S.21B arising from UK FII GLO case
=> aim to ensure that EU source dividends not subject
to higher rate of taxation than domestic dividends
contrary to Freedom of Establishment principle
Domestic effective rate may be lower than 12.5% on
underlying profits – EU source dividends now at
effective 12.5% => still contrary to EU law???
Election to tax inbound dividends from EU/DTA
resident sub paid out of “trading profits” as defined
NEW FA2010 extended 12.5% CT to dividends
paid from trading profits of non DTA public co’s
© Irish Tax Institute 2011
Inbound Dividends –
Domestic Taxation
Trading Profits
profits from carrying on a trade (exclude “excepted
trade”)
dividends received out of trading profits (traced
through EU/DTA)
Mixture – pro-rating required subject to 75% test
Dividends flowing through non-EU/DTA lose their trading
character
Dividend from <5% shareholding deemed paid out of
trading profits – 12.5% where Case III, exempt where
trading Case I
© Irish Tax Institute 2011
Inbound Dividends –
Domestic Taxation
All dividend deemed to be paid out of trading profits
where
75%+ sub profits are trading profits, and
75%+ assets of group are trading assets
Relevant trade charges offsettable against S.21B
12.5% dividends – S.243A(3)(c)
Relevant trading losses offsettable against S.21B
12.5% dividends – S.396A(3)(c)
Group relief relevant trading losses and excess
relevant trade charges against S.21B 12.5% dividends
– S.420A(3)(a)(iii)
© Irish Tax Institute 2011
Inbound Dividends –
Credit Relief under DTA
Dividends potentially suffer two layers of taxation
Underlying tax – tax on the profits out of which
dividend paid
Dividend Withholding tax
DTA usually limits level of DWT depending on %
shareholding, e.g. UK DTA – max 15% WHT, reduced
to 5% with 10%
DTA imposes minimum shareholder requirement to
avail of credit relief for underlying tax, e.g. Art.21(b)
UK DTA imposes min. 10% voting power
© Irish Tax Institute 2011
Inbound Dividends –
Credit Relief under DTA
Limited no. of DTAs allow relief for underlying tax to
“portfolio” investors (<10% issued share capital)
Belgium, France, Germany, Italy, Japan, Lux, =>
Revenue provide sample effective tax rates for
these jurisdictions (incl. WHT & underlying tax)–
open to taxpayer to calculate actual instead (See
TB67)
Cyprus, Pakistan, Russia & Zambia – taxpayer
must calculate actual effective tax rate
© Irish Tax Institute 2011
Inbound Dividends –
Credit Relief
Bowater principle => Irish measure of foreign income
(IMI) (aka “relevant income”) in case of dividends is
accounting profits before tax (not tax adjusted profits)
Foreign Effective Rate =
Actual ForeignTax (i.e. DWT + % Underlying Tax)
% Accounting Profits before tax
Need to pro-rate accordingly where not all profits
distributed and/or not 100% shareholding
See Task 11.4 (change to eg 9.6)
© Irish Tax Institute 2011
Inbound Dividends –
Unilateral Credit
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Sch24, 9A – unilateral credit relief for WHT and
underlying taxes on dividend income from 5%
Sub – also applies to EU Co with Irish branch
receiving dividend
Unilateral relief applies where no DTA or
requirements for credit relief under DTA not met
(e.g. % shareholding)
Sch 24, 9B – same relief as 9A for underlying tax
borne by lower tier companies
Relief is granted in same manner as per Treaty –
Sch. 24 provisions apply
© Irish Tax Institute 2011
Inbound Dividends – Onshore
Pooling Sch24, 9E
Relief for un-credited foreign tax on inbound
dividends – available for offset against Irish tax arising
on other inbound dividends - see example 9.7
Excess credits available for offset against other
foreign dividends in AP, unutilised c/f for offset in
future AP
Part of Excess Credit relieved by deduction
=> Excess credit for pooling = (100% – Tax Rate%) X
Excess Credit (Sch 24, Paragraph 9 (3)(b))
Restrict tax credit to 75% or 87.5% as appropriate
© Irish Tax Institute 2011
Inbound Dividends – Onshore
Pooling Sch24, 9E
Excess tax credit arising on 25% dividend received from
5% Sub (direct or indirect) may be claimed against CT
arising on any other such inbound dividend (either 25%
or 12.5%) See example 9.8
Excess tax credit arising on S.21B 12.5% “relevant
dividend” offsettable only against CT arising on 12.5%
“relevant dividend”
Consider mix of foreign dividends before 12.5% election
=> may be preferable not to elect – see 9.3.4 pg 166
Unused credits available for carry forward indefinitely –
12.5% excess credits ring-fenced
© Irish Tax Institute 2011
Participation Exemption
– S.626B
 “Participation Exemption”
 An exemption from CGT on disposal of shares in
Qualifying Subs
 ParentCo - Min 5% of OSC, Profits & Assets for
continuous 12 month period at any time during 2 years
period up to date of disposal => no requirement for 5%
at date of disposal
 SubCo – EU/DTA Resident, and
 business of SubCo consists wholly or mainly of the carrying
on of one or more trades, or
 taken together, the businesses of HoldCo and all SubCos
which meet resident/holding period test consist wholly or
mainly of the carrying on of one or more trades.
© Irish Tax Institute 2011
Participation Exemption
– S.626B
 “Wholly or mainly” – no guidance, >50% total profits,
assets or turnover
 S.626B(3) – exemption N/A to
 disposals of shares deriving greater part of value from
land/minerals in State,
 ng/nl transactions per S.617
 Deemed disposals on migration per S.627
 S.626C – extends S.626B to assets related to shares,
e.g. options & other rights to acquire shares
 No loss relief where S.626B applies
 Dividends from SubCo not treated as investment
income for CCS purposes where S.626B applies –
excl FII
© Irish Tax Institute 2011
Chargeable Gains –
Sch24, 9FB
 Many DTAs provide that disposal of shares
taxable in country of residence only except where
greater part of value derive from land/buildings in
other jurisdiction
 Gain chargeable in both countries
 Credit relief under DTA – use Irish measure of
gain to calculate FER
 Unilateral relief where CGT suffered in
jurisdictions covered by DTAs which exclude
CGT (pre 74 Treaties), e.g. France, Germany,
Netherlands
© Irish Tax Institute 2011
Branch, Sub or Rep
Office?
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Company and branch treated as same legal entity for
Irish tax purposes (Irish co with foreign branch or
foreign co with Irish branch)
Other jurisdictions may treat Company and branch as
separate entities for tax purposes, e.g. Luxembourg
Irish branch of foreign co does not prepare own
financial statements – Foreign Co required to file Form
F7, P&L, BS, Directors and Audit report including
consolidated accounts with CRO
Foreign branch of IrishCo – financial statements include
branch profits => full profits taxable in Ireland with credit
for foreign tax. Domestic provisions of foreign
jurisdiction may require separate branch accounts
© Irish Tax Institute 2011
Branch, Sub or Rep
Office?
 Branch
 IrishCo liable to branch profits as earned – credit
relief (DTA, unilateral relief) for foreign tax
suffered
 Transactions between branch and IrishCo
ignored (includes for TP purposes) – Treaty
imposes arm’s length pricing
 Branch losses form part of IrishCo profits –
immediate relief
 Foreign tax base and Irish tax base may differ –
consider in context of FER
© Irish Tax Institute 2011
Branch, Sub or Rep
Office?
 Subsidiary
 Ensure foreign tax residence
 Irish Parent liable to tax on sub profits when
repatriated– credit for WHT and underlying tax
(DTA, unilateral relief)
 No loss relief in Irish Parent for foreign sub
unless S.420C applies
 Entitlement to S.626B relief on future sale
 Irish sub of foreign parent – consider foreign
CFC rules
© Irish Tax Institute 2011
Branch, Sub or Rep
Office?
 Representative office is merely an office in foreign
jurisdiction with no authority to bind the company –
should not constitute a PE (branch or agency)
 No taxable presence in local jurisdiction – may be
requirement to apply PAYE where employees are
carrying out duties in domestic jurisdiction
 Nature of representative office is that no profit
attributable to it (even where foreign Revenue
authority argues that it is a PE under
© Irish Tax Institute 2011
Relief on Intra-group
Financing
Qualifying interest per S.247 deductible as a charge on
income per S.243(8)
S.247 used to finance acquisitions, fund subsidiaries,
restructure groups by way of debt/equity – including non
Irish resident subs
Detailed conditions to be met
Detailed anti-avoidance provisions re interest on intragroup loans (not equity)
Comprehensive recovery of capital rules – S.249
Remember general rules re interest deductibility on
trading account, rental account
© Irish Tax Institute 2011
Relief on Intra-group
Financing
S.247(2) Interest on a loan used to: Acquire shares in a Trading/Rental Co or a
HoldCo of a Trading/Rental Co
 Lend to Trading/Rental Co or a HoldCo of a
Trading/Rental Co where proceeds used wholly
& exclusively for purposes of their trade/ trade
of ConnectedCo
 Repay loan which was applied for either of
these purposes
Note: S.248 for individuals – no relief for interest
on loan to RentalCo
© Irish Tax Institute 2011
Relief on Intra-group Financing –
S.247(3) Conditions
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Investing Co must have Material Interest (>5%
OSC) in Investee Co or a ConnectedCo
Common Director throughout period from loan
application to interest payment
No recovery of capital in period – interest relief
restricted pro-rata per S.249
Interest relief allowed on a paid basis
Loan proceeds cannot have been applied for
some other purpose prior to being used as per
S.247(2)
© Irish Tax Institute 2011
Relief on Intra-group Financing –
S.249 Recovery of Capital
Interest deduction restricted pro-rata where Investing
Co (borrower) recovered or deemed to have recovered
capital from Investee Co or ConnectedCo
Applies to capital recovered during the period from
the application of the proceeds of the loan until interest
paid or within the period beginning 2 years before the
loan proceeds were invested, unless capital recovered
used to
acquire shares/lend money qualifying for relief per
S.247(2), or
repay another loan qualifying for S.247 relief
© Irish Tax Institute 2011
Relief on Intra-group Financing –
S.249 Recovery of Capital
Deemed recovery of capital per S.249(2)
InvestorCo receives consideration for the
sale/repayment of OSC of InvesteeCo or
company connected with InvesteeCo
Investee Co or ConnectedCo repays any loan
from the InvestorCo
InvestorCo receives consideration for the
assumption of a debt due from InvesteeCo or a
ConnectedCo
© Irish Tax Institute 2011
Relief on Intra-group
Financing – S.249
Recovery of Capital
InvestorCo acquires shares in Holdco which holds
shares in TradeCo/RentalCo
InvestorCo deemed to have recovered capital where
Holdco itself recovers capital from a 51% TradeCo/
RentalCo Sub unless capital used to
repay a loan made to it by InvestCo;
redeem shares held by InvestorCo; OR
acquire shares in TradeCo/CaseVCo or repay
another S.247 loan
More than one InvestorCo – apportion deemed
recovery between InvestorCos pro-rata to amount
subscribed/lent (S249(2)(a)(iii))
© Irish Tax Institute 2011
Relief on Intra-group Financing –
Anti-avoidance S.247(4A)
Internal Debt
 Targets “internal debt” transactions –
related-party borrowings to acquire OSC
in ConnectedCo creating deductible interest
charge
 Applies to borrowings on/after 2 Feb 06
 S247(4A)(a) – applies where loan advanced
 from connected party, and
 to acquire share capital or lend money
ultimately used to acquire share capital
of connected company
© Irish Tax Institute 2011
Relief on Intra-group Financing –
Anti-avoidance S.247(4A)
Internal Debt
S247(4A)(b) –applies where third party borrowings
financed back-to-back from related-party assets to
circumvent S247(4A)(a)
 S.247(4A) related party interest restriction N/A to
 Third-party borrowings (for OSC/loan) –
provided not back-to-back arrangement
 Interest on replacement pre 2 Feb 06
borrowings
 Interest on related party borrowings used to
acquire share capital of Unconnected Co
 Interest on related party borrowings to lend
to group company for trading purposes
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© Irish Tax Institute 2011
Relief on Intra-group Financing –
Anti-avoidance S.247(4A) Internal
Debt
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S.247(4A)(c) – no restriction where related
party borrowings used to acquire newly
issued OSC where share capital used for
trade/business
 S.247(4A)(d), (e) & (f) – no restriction on
interest from related party borrowings to
acquire OSC to extent investment
generates taxable income
 See examples Pg. 190+
© Irish Tax Institute 2011
Anti-avoidance
Outbound Investment
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S.590 Attribution of Gains – see Part 2 material
S.129A – anti-avoidance provision which taxes
dividends from Irish sub under Case IV where
profits earned while sub non-Irish resident
 Applies only where sub controlled by Irish
residents (at any time) before migration
 Applies to sub which becomes Irish resident
after 3 April 2010
 Applies to dividends paid in 10 year period
post migration
 Schedule 24 DTA relief available
© Irish Tax Institute 2011
Recap
 Repatriation out of Ireland
– Does WHT apply: domestic, EU and DTA
relief
– Repatriate by dividends, interest, royalties
capital distribution
– Caught by Transfer pricing
 Repatriation into Ireland
– How is income taxed, what rate?
– What relief is given, DTA or unilateral
– How is relief calculated
© Irish Tax Institute 2011
Recap
 How is double tax relief calculated on
– trading royalties
– non trade interest
– Branch profits
 What is Bowwater principle?
 When is interest incurred on borrowings
for intra-group transactions tax deductible?
 What is meant by “participation exemption”
© Irish Tax Institute 2011
Legislative References
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S25 Non residents, S26 Charging section
S29 CGT non residents
S627 Deemed disposal of assets (exit charge)
S628 Postponement of exit charge under S627
S629 Tax on non resident Co recoverable from resident
member or director
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S626B Participation exemption
Schedule 25A
S247 Interest as a charge
S249 Recovery of capital rules
S129A post migration Divs
© Irish Tax Institute 2011
Legislative References
Schedule 24 Credit relief
 Para 4 Basis for determining max amount of credit
Interest
 Para 9 D unilateral credit relief (includes non DTA) for
trading interest
 Para 9 F- onshore pooling of foreign credit (not for
royalties)
 Para 7 deduction for foreign credit where not trading
Royalties
 Para 9 DB unilateral credit relief (DTA only) for trading R
 Para 7 deduction for foreign credit where not trading
© Irish Tax Institute 2011
Legislative References
Foreign branch profit
 Para 4 (2A) not to use t/o basis, use Irish calc of foreign
tax
 Para 9 DA unilateral credit relief for foreign tax
 Para 9 FA- onshore pooling of foreign credit
Dividends
 Para 9 A unilateral credit relief for WHT and underlying
tax from 5% subs (includes non DTA)
 Para 9 B extends credit for WHT aand underlying tax for
lower tier subs
 Para E onshore pooling of foreign credit
© Irish Tax Institute 2011
Past Questions
Autumn 08, Q6, 6 marks (pg 328) format of structuring
overseas, branch v sub
Summer 2009, Q4(a), 8 marks S247, 4(c)div from
foreign sub
Summer 2009, Q5, 7markss, pg355, Dividends from
foreign sub calculate credit
Summer 09. Q6 Pg356
Summer 2010,Q1, full question, Pg 418, Branch v sub,
overseas set up, CFC, TP, Thin Cap
Autumn 2010, Q1, Full Question, P446, tax treatment of
inbound and outbound divs, S247
Autumn 2010, Q3 (b), pg 449, WHT on payment of
interest
© Irish Tax Institute 2011
Past Questions
Autumn 2010, Q4, full question –P451 S21 and
calculation of credit on inbound divs
Summer 2011, Q4(b)(ii), 6 marks, Participation
exemption & schedule 25A
Summer 2011, Q6(a) WHT on royalty payment to China
(theory)
Autumn 2011, Q1(i)6 marks calculate credit on foreign
divs,
Autumn 2011, Q3(a)(i), 5marks, exit charge, 3(a)(ii), 3
marks , participation exemption
© Irish Tax Institute 2011
Preparation for Lecture 4
 Read Chapters 10-12 inclusive
 Work through examples in chapters 8 & 9
© Irish Tax Institute 2011