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39 1997

TAXES CONSOLIDATION ACT, 1997

CHAPTER 5

Computational provisions: corporation tax

Computation of income: application of income tax principles.

[CTA76 s11(1), (2)(b) and (3) to (8); FA96 s132(2) and Sch5 PtII]

76. —(1) Except where otherwise provided by the Tax Acts, the amount of any income shall for the purposes of corporation tax be computed in accordance with income tax principles, all questions as to the amounts which are or are not to be taken into account as income, or in computing income, or charged to tax as a person's income, or as to the time when any such amount is to be treated as arising, being determined in accordance with income tax law and practice as if accounting periods were years of assessment.

(2) For the purposes of this section, “income tax law”, in relation to any accounting period, means the law applying to the charge on individuals of income tax for the year of assessment in which that accounting period ends, but does not include such of the enactments of the Income Tax Acts so applying as make special provision for individuals in relation to matters referred to in subsection (1).

(3) Accordingly, for the purposes of corporation tax, income shall be computed and the assessment shall be made under the like Schedules and Cases as apply for the purposes of income tax, and in accordance with the provisions applicable to those Schedules and Cases, but (subject to the Corporation Tax Acts) the amounts so computed for several sources of income, if more than one, together with any amounts to be included in respect of chargeable gains, shall be aggregated to arrive at the total profits.

(4) Nothing in this section shall be taken to mean that income arising in any period is to be computed by reference to any other period (except in so far as this results from apportioning to different parts of a period income of the whole period).

(5) Subject to section 77 and to any enactment applied by this section which expressly authorises such a deduction, no deduction shall be made for the purposes of the Corporation Tax Acts in computing income from any source—

(a) in respect of dividends or other distributions, or

(b) in respect of any yearly interest, annuity or other annual payment or any other payments mentioned in section 104 or 237 (2), but not including sums which are, or but for any exemption would be, chargeable under Case V of Schedule D.

(6) Without prejudice to the generality of subsection (1), any provision of the Income Tax Acts, or of any other statute, which confers an exemption from income tax, provides for the disregarding of a loss, or provides for a person to be charged to income tax on any amount (whether expressed to be income or not, and whether an actual amount or not), shall, except where otherwise provided, have the like effect for the purposes of corporation tax.

(7) This section shall not have effect so as to apply for the purposes of corporation tax anything in section 71 .

(8) Where by virtue of this section or otherwise any enactment applies both to income tax and to corporation tax—

(a) that enactment shall not be affected in its operation by the fact that income tax and corporation tax are distinct taxes but, in so far as is consistent with the Corporation Tax Acts, shall apply in relation to income tax and corporation tax as if they were one tax, so that, in particular, a matter which in a case involving 2 individuals is relevant for both of them in relation to income tax shall in a like case involving an individual and a company be relevant for such individual in relation to income tax and for such company in relation to corporation tax, and

(b) for that purpose, references in any such enactment to a relief from or charge to income tax or to a specified provision of the Income Tax Acts shall, in the absence of or subject to any express adaptation, be construed as being or including a reference to any corresponding relief from or charge to corporation tax or to any corresponding provision of the Corporation Tax Acts.

Miscellaneous special rules for computation of income.

[CTA76 s12(1) to (7)]

77. —(1) For the purposes of corporation tax, income tax law as applied by section 76 shall apply subject to subsections (2) to (7).

(2) (a) Where a company begins or ceases to carry on a trade, or to be within the charge to corporation tax in respect of a trade, the company's income shall be computed as if that were the commencement or, as the case may be, discontinuance of the trade, whether or not the trade is in fact commenced or discontinued.

(b) Notwithstanding paragraph (a), where any provision of the Income Tax Acts is applied for corporation tax by the Corporation Tax Acts, this subsection shall not apply for any purpose of that provision if under any enactment a trade is not to be treated as permanently discontinued for the corresponding income tax purpose.

(3) In computing income from a trade, section 76 (5)(b) shall not prevent the deduction of yearly interest.

(4) In computing a company's income for any accounting period from the letting of rights to work minerals in the State, there may be deducted any sums disbursed by the company wholly, exclusively and necessarily as expenses of management or supervision of those minerals in that period; but any enactments restricting the relief from income tax that might be given under section 111 shall apply to restrict in the like manner the deductions that may be made under this subsection.

(5) Where a company is chargeable to corporation tax in respect of a trade under Case III of Schedule D, the income from the trade shall be computed in accordance with the provisions applicable to Case I of Schedule D.

(6) The amount of any income arising from securities and possessions in any place outside the State shall be treated as reduced (where such a deduction cannot be made under, and is not forbidden by, any provision of the Income Tax Acts applied by the Corporation Tax Acts) by any sum paid in respect of income tax in the place where the income has arisen.

(7) Paragraphs (e) and (f) of Case III of Schedule D in section 18 (2) shall for the purposes of corporation tax extend to companies not resident in the State, in so far as those companies are chargeable to tax on income of descriptions which, in the case of companies resident in the State, are within those paragraphs (but without prejudice to any provision of the Income Tax Acts specially exempting non-residents from income tax on any particular description of income).

Computation of companies' chargeable gains.

[CTA76 s13(1), (1A), (1B), (1C), (2), (3)(a) and (c), (4) and (5); FA82 s31(1); FA88 Sch3 PtI par1(b); FA97 s59(2) and Sch6 PtI par1]

78. —(1) Subject to this section, the amount to be included in respect of chargeable gains in a company's total profits for any accounting period shall be determined in accordance with subsection (3) after taking into account subsection (2).

(2) Where for an accounting period chargeable gains accrue to a company, an amount of capital gains tax shall be calculated as if, notwithstanding any provision to the contrary in the Corporation Tax Acts, capital gains tax were to be charged on the company in respect of those gains in accordance with the Capital Gains Tax Acts, and as if accounting periods were years of assessment; but, in calculating the amount of capital gains tax, section 31 shall apply as if the reference in that section to deducting allowable losses were a reference to deducting relevant allowable losses.

(3) (a) The amount referred to in subsection (1) shall be an amount which, if (before making any deduction from the amount) it were charged to corporation tax as profits of the company arising in the accounting period at the rate specified in section 21 (1), would produce an amount of corporation tax equal to the amount of capital gains tax calculated for that accounting period in accordance with subsection (2).

(b) For the purposes of paragraph (a), where part of the accounting period falls in one financial year (in this paragraph referred to as the “first-mentioned financial year”) and the other part falls in the financial year succeeding the first-mentioned financial year and different rates are in force under section 21 (1) for each of those years, “the rate specified in section 21 (1)” shall be deemed to be a rate per cent determined by the formula—

(A × C)

______

E

+

(B × D)

______

E

where—

A is the rate per cent in force for the first-mentioned financial year,

B is the rate per cent in force for the financial year succeeding the first-mentioned financial year,

C is the length of that part of the accounting period falling in the first-mentioned financial year,

D is the length of that part of the accounting period falling in the financial year succeeding the first-mentioned financial year, and

E is the length of the accounting period.

(c) Paragraph (b) shall apply as respects accounting periods ending on or after the 1st day of April, 1997, as if—

(i) the period beginning on the 1st day of January, 1996, and ending on the 31st day of March, 1997, and

(ii) the period beginning on the 1st day of April, 1997, and ending on the 31st day of December, 1998,

were each a financial year.

(4) In subsection (2)—

chargeable gains” does not include chargeable gains accruing on relevant disposals within the meaning of section 648 ;

relevant allowable losses” means any allowable losses accruing to the company in the accounting period and any allowable losses previously accruing to the company while it has been within the charge to corporation tax in so far as they have not been allowed as a deduction from chargeable gains accruing in any previous accounting period.

(5) Except where otherwise provided by the Corporation Tax Acts, chargeable gains and allowable losses shall for the purposes of corporation tax be computed in accordance with the principles applying for capital gains tax, all questions as to the amounts which are or are not to be taken into account as chargeable gains or as allowable losses, or in computing gains or losses, or charged to tax as a person's gain, or as to the time when any such amount is to be treated as accruing, being determined in accordance with the provisions relating to capital gains tax as if accounting periods were years of assessment.

(6) Subject to subsection (8), where the enactments relating to capital gains tax contain any reference to income tax or to the Income Tax Acts, the reference shall, in relation to a company, be construed as a reference to corporation tax or to the Corporation Tax Acts; but—

(a) this subsection shall not affect the references to income tax in section 554 (2), and

(b) in so far as those enactments operate by reference to matters of any specified description, for corporation tax account shall be taken of matters of that description which are confined to companies, but not of any such matters which are confined to individuals.

(7) The Capital Gains Tax Acts as extended by this section shall not be affected in their operation by the fact that capital gains tax and corporation tax are distinct taxes but, in so far as is consistent with the Corporation Tax Acts, shall apply in relation to capital gains tax and corporation tax on chargeable gains as if they were one tax, so that, in particular, a matter which in a case involving 2 individuals is relevant for both of them in relation to capital gains tax shall in a like case involving an individual and a company be relevant for such individual in relation to capital gains tax and for such company in relation to corporation tax.

(8) Where assets of a company are vested in a liquidator, this section and the enactments applied by this section shall apply as if the assets were vested in, and the acts of the liquidator in relation to the assets were the acts of, the company (acquisitions from or disposals to the liquidator by the company being disregarded accordingly).

Foreign currency: computation of income and chargeable gains.

[CTA76 s12A; FA94 s56(a); FA96 s45(1)]

79. —(1) (a) In this section—

profit and loss account” means—

(i) in the case of a company (in this definition referred to as the “resident company”) resident in the State, the account of that company, and

(ii) in the case of a company (in this definition referred to as the “non-resident company”) not resident in the State but carrying on a trade in the State through a branch or agency, the account of the business of the company carried on through or from such branch or agency,

which, in the opinion of the auditor appointed under section 160 of the Companies Act, 1963 , or under the law of the State in which the resident company or non-resident company, as the case may be, is incorporated and which corresponds to that section, presents a true and fair view of the profit or loss of the resident company or the business of the non-resident company, as the case may be;

rate of exchange” means a rate at which 2 currencies might reasonably be expected to be exchanged for each other by persons dealing at arm's length or, where the context so requires, an average of such rates;

relevant contract”, in relation to a company, means any contract entered into by the company for the purpose of eliminating or reducing the risk of loss being incurred by the company due to a change in the value of a relevant monetary item, being a change resulting directly from a change in a rate of exchange;

relevant monetary item”, in relation to a company, means money held or payable by the company for the purposes of a trade carried on by it;

relevant tax contract”, in relation to an accounting period of a company, means any contract entered into by the company for the purpose of eliminating or reducing the risk of loss being incurred by the company due to a change in the value of money payable in discharge of a liability of the company to corporation tax for the accounting period, being a change resulting directly from a change in a rate of exchange of the functional currency (within the meaning of section 402 ) of the company for the currency of the State.

(b) The treatment of a contract entered into by a company as a relevant contract for the purposes of this section shall be disregarded for any other purpose of the Tax Acts.

(2) Notwithstanding section 76 , for the purposes of corporation tax, the amount of any gain or loss, whether realised or unrealised, which—

(a) is attributable to any relevant monetary item or relevant contract of a company,

(b) results directly from a change in a rate of exchange, and

(c) is properly credited or debited, as the case may be, to the profit and loss account of the company,

shall be taken into account in computing the trading income of the company.

(3) (a) Notwithstanding section 78 , for the purposes of corporation tax, where any gain or loss arises to a company in respect of—

(i) a relevant contract of the company, or

(ii) money held by the company for the purposes of a trade carried on by it,

so much of that gain or loss as results directly from a change in a rate of exchange shall not be a chargeable gain or an allowable loss, as the case may be, of the company.

(b) This subsection shall not apply as respects any gain or loss arising to a company carrying on life business within the meaning of section 706 (1), being a company which is not charged to corporation tax in respect of that business under Case I of Schedule D.

(4) Notwithstanding section 78 , so much of the amount of any gain or loss arising to a company which carries on a trade in the State in an accounting period as—

(a) is attributable to any relevant tax contract in relation to the accounting period,

(b) results directly from a change in a rate of exchange, and

(c) (i) where it is a gain, does not exceed the amount of the loss which, if the company had not entered into the relevant tax contract, would have been incurred by the company, and

(ii) where it is a loss, does not exceed the amount of the gain which, if the company had not entered into the relevant tax contract, would have arisen to the company,

due to a change in the value of money payable in discharge of a liability of the company to corporation tax for the accounting period,

shall not be a chargeable gain or an allowable loss, as the case may be, of the company.

Taxation of certain foreign currencies.

[FA93 s47(1) and (2)]

80. —(1) In this section—

relevant liability”, in relation to an accounting period, means relevant principal—

(a) denominated in a currency other than the currency of the State, and

(b) the interest in respect of which—

(i) is to be treated as a distribution for the purposes of the Corporation Tax Acts, and

(ii) is computed on the basis of a rate which, at any time in that accounting period, exceeds 80 per cent of the specified rate at that time;

relevant principal” means an amount of money advanced to a borrower by a company, the ordinary trading activities of which include the lending of money, where—

(a) the consideration given by the borrower for that amount is a security within subparagraph (ii), (iii)(I) or (v) of section 130 (2)(d), and

(b) interest or any other distribution is paid out of the assets of the borrower in respect of that security;

specified rate” means—

(a) the rate known as the 3 month Dublin Interbank Offered Rate, a record of which is maintained by the Central Bank of Ireland, or

(b) where such a record was not maintained, the rate known as the Interbank market 3 month fixed rate as published in the statistical appendices of the bulletins and annual reports of the Central Bank of Ireland.

(2) Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, a profit or loss from any foreign exchange transaction, being a profit or loss which arises in an accounting period—

(a) in connection with relevant principal which, in relation to the accounting period, is a relevant liability, and

(b) to a company which, in relation to that relevant liability, is the borrower,

shall for the purposes of those Acts be deemed to be a profit or gain or a loss, as the case may be, of the trade carried on by the borrower in the course of which trade the relevant liability is used.