Revenue Note for Guidance

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Revenue Note for Guidance

Schedule 2

[Sections 33, 61 and 62]

Machinery for Assessment, Charge and Payment of Tax Under Schedule C and, in Certain Cases, Schedule D

Overview

This Schedule sets out the machinery for the assessment, charge and payment of tax under Schedule C and, in certain limited circumstances, Schedule D.

PART 1

Interpretation of Parts 2 to 4

par 1 The meaning of certain terms which are defined in section 32 (namely “banker”, “coupons”, “dividends”, “public revenue”, “public revenue dividends” and “foreign revenue dividends”) are applied for the purposes of Parts 4 of this Schedule, except that for the purposes of Part 4, the term “dividends” includes any interest, dividend or other annual payment payable out of or in respect of stocks, shares or securities of any non-resident body of persons (that is, foreign dividends). However, such foreign dividends do not include payments made out of taxed income which has suffered tax deducted at source under section 237 or 238.

par 1A “chargeable person” is defined as one of the following:

  1. a person entrusted with the payment of dividends payable to any person in the State out of any public revenue;
  2. a person in the State entrusted with payment of dividends to which Chapter 2 of Part 4 applies (i.e. foreign dividends and interest);
  3. a banker or other person in the State who obtains payment of dividends chargeable under Schedule C or of foreign dividends chargeable under Schedule D;
  4. a banker in the State who sells or otherwise realises coupons such that the proceeds of sale or realisation are chargeable to income tax under Schedule C or Schedule D (in the case of foreign dividends);
  5. a dealer in the state who purchases coupons in such manner that the purchase price is chargeable to income tax under Schedule C or ScheduleD (in the case of foreign dividends).

“specified dividend income” is defined as one of the following:

  1. the amount of dividends which are payable to any person in the State out of any public revenue;
  2. the amount of dividends to which Chapter 2 of Part 4 applies (i.e. foreign dividends and interest);
  3. the amount of dividends received by a “chargeable person” in such circumstances that the dividends are chargeable to income tax under Schedule C or Schedule D (in the case of foreign dividends);
  4. the proceeds of the sale or realisation of coupons where those proceeds are chargeable to income tax under Schedule C or Schedule D (in the case of foreign dividends),
  5. the price paid on purchase of coupons where such price paid on purchase is chargeable to income tax under Schedule C or under Schedule D (in the case of foreign dividends).

PART 2

Part 2 was deleted by section 38 of the Finance Act 2012.

PART 3

Part 3 was deleted by section 38 of the Finance Act 2012.

PART 4

Public revenue dividends, dividends to which Chapter 2 of Part 4 applies, proceeds of coupons and price paid on purchase of coupons

par 14(1) A “chargeable person” must, from the 1st January 2021, on making a payment of “specified dividend income”, deduct encashment tax, at the rate of 25% from the payment.

Prior to the 1st January 2021 encashment tax was deducted at the rate of 20%.

The provision to deduct encashment tax is made subject to Chapter 2 of Part 3 so as to enable interest paid on Irish Government bonds to continue to be paid free of withholding tax in accordance with the provisions of that Chapter.

par 14(2) The encashment tax deducted is deemed to be a payment of income tax by the person entitled to the “specified dividend income” and is to be allowed by those persons on receipt of the balance of the dividends.

par 14(3) The requirement to deduct encashment tax does not apply, from the 1st January 2021, to a payment of “specified dividend income” that is beneficially owned by a company.

par 15(1) A “chargeable person” is required to make a return to the Collector General, within 46 days of the end of the year of assessment, of all encashment tax deducted from “specified dividend income”.

par 15(2)(a) The encashment tax deducted by the “chargeable person” is due at the time that the return is to be made to the Collector General.

par 15(2)(b) The encashment tax deducted by the “chargeable person” should be paid to the Collector General without the making of an assessment.

For the purposes of securing collection of the encashment tax or any interest due on the encashment tax, an assessment may be made by the inspector where the encashment tax or any part of the encashment tax is not paid on time.

par 15(3) Section 16 Finance Act 2020, which is subject to a commencement order, provides that the encashment tax return prescribed by the Revenue Commissioners should include the following:

  • par 15(3)(a) the name and address of the person to whom the payment of the “specified dividend income” is made,
  • par 15(3)(b) the amount and type of the payment,
  • par 15(3)(c) the amount of income tax deducted from the payment,
  • par 15(3)(d) a declaration to the effect that the return is correct and complete.”

par 16(1) An inspector may make estimated assessments where a “chargeable person”.

  • has not made a return, or
  • has made a return that includes an incorrect amount of encashment tax, or
  • has made a return with which the inspector is dissatisfied.

The due date for any tax contained in the assessment is, for the purposes of interest on unpaid tax, the date on which the tax should have been paid if a correct return had been made in due time.

par 16(2) The due date for the payment of tax in respect of which an assessment has been issued is one month after the issue of the notice of assessment.

However that due date cannot displace an earlier due date which would have been applicable under Paragraph 15.

par 16(3) Any tax overpaid on determination of an appeal against such an assessment is to be repaid.

par 17 If an item is incorrectly included on a encashment tax return the inspector may make any necessary assessments, adjustments or set-offs to secure the correct tax liabilities of the “chargeable person” (and, if necessary, of the beneficial owner of the dividend income).

par 18(1) Section 16 Finance Act 2020, which is subject to a commencement order, provides that a “chargeable person” is to keep a separate account in respect of each person entitled to receive “specified dividend income”.

The separate accounts should contain-

  • par 18(1)(a) the name and address of each person entitled to receive the “specified dividend income”,
  • par 18(1)(b) the amount and type of the “specified dividend income” payments made to each person,
  • par 18(1)(c) the amounts of income tax deducted on the “specified dividend income” payments,

and

  • par 18(1)(d) in the case of public revenue dividends, details of the public revenue from which the dividends were paid.

par 18(2) A chargeable person is required to:

  • retain the records referred to above for a period of 6 years from the day the payment was made and
  • on being required by notice in writing, make such records available to the inspector within the time period specified in the notice.

par 19 The provisions of section 898N apply to encashment tax as if a reference in section 898N to:

  1. par 19(a) “books, records or other documents” were a reference to books and records for the purposes of Schedule 2,
  2. par 19(b) an “authorised officer” were a reference to a “Revenue officer” as defined in section 898B
    and
  3. par 19(c) to a “paying agent” as defined in section 898B were a reference to a “chargeable person”.

par 20 The provisions of the Income Tax Acts relating to the assessment, appeal and collection of income tax apply to the assessment, collection and recovery of encashment tax.

par 21(1) Interest is payable at the rate of 0.0274 per cent per day or part of a day on the late payment of encashment tax which is payable without the making of an assessment.

par 21(2) The payment and procedural provisions of section 1080 which apply to interest on assessed taxes are applied to interest payable on encashment tax.

par 21(3) Where an assessment to encashment tax is made, the provisions of section 1080 are to apply with the omission of subsection (2)(b).

Subsection (2)(b) deals with the date from which interest is payable in a case where there is an appeal against an income tax assessment. This provision is not required in the case of an assessment to encashment tax as the due date of payment of interest in such a case is set out in paragraph 15. The provisions of paragraph 15 apply whether or not there is an appeal against an assessment to encashment tax.

par (22) Where:

  1. par 22(a) encashment tax in respect of the proceeds of sale or realisation of any coupon or in respect of the purchase price of any coupon has been accounted for by any banker or
    dealer in coupons, and
  2. par 22(b) the Revenue Commissioners are satisfied that encashment tax has also been deducted from the dividends payable on those coupons,

then that encashment tax is to be repaid.

PART 5

Relief from obligation to pay tax on certain interest, dividends and other annual payments in the case of persons entrusted with payment

par 23 Where any interest, dividends or other annual payments payable out of any foreign public revenue or in respect of stocks, funds, shares, or securities of any non-resident body of persons, are entrusted for payment by a person in the State to any other person in the State, the Revenue Commissioners may relieve the person so entrusted from the obligation to retain tax from that payment.

par 24 Where such relief is granted the Revenue Commissioners may prescribe any condition they feel is necessary to ensure that the assessment and payment of any income tax assessable and payable in respect of such interest, dividends or other annual payments is so assessed and paid.

par 25 A letter signed by a Secretary or an Assistant Secretary of the Revenue Commissioners or a notice published in Iris Oifigiúil stating that the Revenue Commissioners have exercised any or all of their powers conferred on them by this Part is sufficient evidence that they have done so.

par 26 Where a person is relieved from their obligation to retain income tax from a payment of interest, dividends or other annual payments, the income tax assessable and payable in respect of that payment is assessable on, and payable by, the recipient under the appropriate Case of Schedule D.

par 27 Paragraph 27 was deleted by Section 38 of the Finance Act 2012.

par 28 The obligation to deduct tax at source is disapplied in certain circumstances: Where any interest, dividends or other annual payments payable out of any foreign public revenue or in respect of stocks, funds, shares, or securities of any non-resident body of persons, are entrusted for payment by a person in the State to an investment undertaking within the gross-roll-up taxation regime, then the obligation imposed on the person so entrusted to retain tax from the payment is disapplied.

Relevant Date: Finance Act 2021