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18 1950

FINANCE ACT, 1950

PART V.

Relief of Double Taxation: Income Tax, Sur-Tax and Corporation Profits Tax.

Confirmation of Convention set forth in Second Schedule:

12. —(1) The convention set forth in Part I of the Second Schedule to this Act and concluded on the 13th day of September, 1949, between the Government and the Government of the United States of America (in this section referred to as the Convention) is hereby confirmed and shall have the force of law.

(2) For the purpose of giving effect to the Convention, the provisions set forth in Part II of the Second Schedule to this Act shall have effect.

(3) The necessary apportionments shall be made for the purpose of giving effect to the terms of the Convention as respects corporation profits tax in the case of accounting periods beginning before the 1st day of April in the year in which the Convention first has effect and ending on or after that date, 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 the said 1st day of April and in the remaining part of the said relevant accounting period respectively.

(4) 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 thereto, 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.

Provision as to dividends.

13. —(1) This section applies to any dividend payable after the passing of this Act, being a dividend from which deduction of tax is authorised by Rule 20 of the General Rules.

(2) In this section—

the expression “the company” means a body of persons paying a dividend to which this section applies;

the expression “double taxation relief” means any credit for tax (other than British income tax) payable in any territory outside the State, which is allowable against Irish income tax by virtue of any international agreement having the force of law, including any such credit which has been taken into account in relation to any dividends receivable by the company;

the expression “the reduced Irish rate” means the rate of Irish income tax payable directly or by deduction by the company after taking double taxation relief into account.

(3) (i) Notwithstanding anything in the Income Tax Acts, no relief or repayment in respect of the tax deducted or authorised to be deducted from any dividend to which this section applies shall, in a case in which there is double taxation relief, be allowed at a rate exceeding the reduced Irish rate.

(ii) Where the reduced Irish rate falls to be computed in relation to a dividend, the particulars to be given by the company in the statement required by section 13 of the Finance Act, 1925 (No. 28 of 1925), and section 5 of the Finance Act, 1940 (No. 14 of 1940), shall (in addition to the particulars required to be given apart from this section) include particulars of the reduced Irish rate.

(4) Where a dividend has been paid before the passing of this Act, and any double taxation relief would have fallen to be taken into account in relation to that dividend if this section had applied thereto, that relief shall be taken into account as far as possible in determining the reduced Irish rate in relation to the first dividend payable by the company to which this section applies, and any part of that relief which cannot be so taken into account shall as far as possible be taken into account in relation to the next succeeding dividend, and so on.

(5) Where the whole or any part of any annual payment is payable out of a dividend to which this section applies, and the rate of relief or repayment allowable in respect of the tax deducted or authorised to be deducted from the dividend is affected by double taxation relief, the annual payment, or that part thereof, as the case may be, shall be deemed to be paid out of profits or gains not brought into charge to tax and Rule 21 of the General Rules shall apply accordingly, but the tax recoverable under the said Rule from the person making the payment shall be reduced by an amount equal to tax on the payment or part of the payment at the reduced Irish rate applicable to the dividend.

Determination of reduced Irish rate.

14. —(1) In this section, the expressions “the reduced Irish rate”, “double taxation relief” and “the company” have the same meaning as in the last preceding section and the word “dividend” means a dividend to which that section applies.

(2) The reduced Irish rate in relation to any dividend shall be taken to be the rate which is produced by deducting—

(a) the rate of double taxation relief for the period for which the dividend is paid, from

(b) the rate of tax authorised to be deducted from the dividend by Rule 20 of the General Rules.

(3) Subject to any adjustment which is required by subsection (4) of the last preceding section or by subsection (4) of this section, the rate of double taxation relief for the period for which the dividend is paid shall be taken to be—

(a) in the case of a dividend paid for a period which falls wholly within any year of assessment, the rate which is produced by dividing the double taxation relief for that year of assessment by a sum consisting of the total income of the company as computed for income tax purposes for that year reduced by the amount of any income the income tax upon which the company is entitled, otherwise than under Rule 20 of the General Rules, to charge against any other person;

(b) in the case of a dividend paid for a period which falls partly within one year of assessment and partly within another year of assessment or other years of assessment, the rate which is produced by determining, in relation to each of those years,—

(i) the rate which would have been applicable if the dividend had been paid for a period falling wholly within that year, and

(ii) the portion of that rate which bears the same proportion to that rate as the part of the period for which the dividend is paid which falls within that year bears to the whole period,

and then aggregating the portions so determined.

(4) Where any matter affecting the calculation of the rate of double taxation relief has not been fully determined at the time when the reduced Irish rate falls to be determined in relation to any dividend, the rate of double taxation relief shall be estimated according to the best of the information available at the time, and, if it is subsequently found that the rate so estimated was excessive or deficient, the appropriate adjustment shall be made in determining the reduced Irish rate applicable to the next subsequent dividend on the occasion of which it is practicable to make the adjustment, and shall be made by reducing or, as the case may be, increasing the rate of double taxation relief, as calculated for the purposes of that subsequent dividend in accordance with the foregoing subsection, by a rate which bears the same proportion to the excess or deficiency in the rate applicable to the first-mentioned dividend as the total amount of the first-mentioned dividend bears to the total amount of that subsequent dividend.

(5) Where the double taxation relief for any year of assessment includes any credit which has been taken into account for the purposes of determining the reduced Irish rate applicable to any dividends received by the company, the amount of that credit shall be taken to be the sum of the amounts which are produced by applying to each such dividend the rate which represents the excess of the rate of tax authorised to be deducted from that dividend by Rule 20 of the General Rules over the reduced Irish rate applicable to that dividend.

(6) For the purposes of this section, a dividend which is not expressed to be paid for any specified period shall be deemed to be paid for the last period for which accounts of the company were made up which ended before the dividend became payable.

Construction of this Part of this Act.

15. —This Part of this Act and the Second Schedule to this Act shall, so far as they relate to income tax (including sur-tax), be read and construed together with the Income Tax Acts and shall, so far as they relate to corporation profits tax, be read and construed together with Part V of the Finance Act, 1920, as amended or extended by subsequent enactments.