Schedule 24

[Sections 826 and 833]

Relief from Income Tax and Corporation Tax by Means of Credit in Respect of Foreign Tax

Overview

An Irish resident company is liable to corporation tax on all its profits wherever arising. It may also be liable to tax in other countries in respect of its income or gains.

An Irish resident individual is, subject to some exceptions, liable to income tax in respect of his/her world-wide income and capital gains tax in respect of world-wide chargeable gains. In some cases, part of that individual’s income and gains may also be subject to tax in another country.

“double taxation” is the term used when a source of income is chargeable to tax in more than one country (that is, the income is doubly taxed). Relief from this double tax charge is known as “double taxation relief”.

A Double Taxation Convention (sometimes called a “Double Taxation Agreement”) is an international treaty concluded between the Government and the government of another country to provide, in the main, for the avoidance of double taxation.

Where income is chargeable to tax in more than one country (under the domestic tax legislation of each country) and a Double Taxation Convention is in force between the countries, the double charge to tax is generally relieved by either —

• exempting the income from tax in one of the countries, or
• allowing a credit in one country for the tax paid in respect of that income in the other country.

To determine which method of relief may be due it is necessary to examine the provisions of the relevant double taxation convention.

Schedule 24 sets out the “mechanics” for determining the amount of the credit, against Irish income tax, universal social charge, corporation tax and capital gains, in respect of foreign tax paid that can be given. This amount of credit cannot exceed the Irish tax due on the income from which the foreign tax was deducted. However, subject to certain conditions, surplus foreign tax may be credited against Irish tax on other foreign income or gains.

The Schedule also provides—

• that Irish resident parent companies which receive dividends from their subsidiaries (minimum of 5% shareholding) in countries with which Ireland does not have a tax treaty may now offset tax (whether it is in the form of withholding tax, or corporation tax on the subsidiaries’ profits) against Irish corporation tax on the dividends,
• that where Irish resident parent companies have foreign subsidiaries (whether in treaty or non-treaty countries) and the foreign subsidiaries have themselves subsidiaries (sub-subsidiaries) in other countries an appropriate part of the tax paid by these “sub-subsidiaries” may, subject to certain conditions, be offset against Irish corporation tax on dividends received by the Irish parent,
• that where the foreign tax exceeds the Irish tax on certain dividends, the excess may be offset against Irish tax on other foreign dividends received in the accounting period concerned,
• that an Irish company may set foreign tax suffered on its branch income against Irish tax on that income in the accounting period concerned,
• that where the foreign tax exceeds the Irish tax on branch income, the excess may be offset against Irish tax on other foreign branch income received in the accounting period concerned,
• that withholding tax suffered by companies on royalty payments received in the course of a trade from countries with which Ireland does not have a tax treaty may be credited against the corporation tax attributable to those royalties.
• that any unrelieved foreign tax suffered by companies on relevant royalties may be used to reduce other foreign royalty income.
• that withholding tax suffered by companies, on leasing income, received in the course of a trade, from countries with which Ireland does not have a tax treaty may be credited against the corporation tax attributable to that leasing income.
• that where foreign CGT is suffered in a treaty country but that treaty does not cover relief from CGT, then credit for the foreign tax will be given against Irish capital gains tax suffered, and
• that an additional credit for tax on foreign dividends may be due, where the existing credit for foreign tax on certain dividends is less than the amount that would be computed by reference to the nominal rate of tax in the country from which the dividend is paid.

Details

Interpretation

par 1(1) An “arrangement” is a double taxation convention.

“aggregate income for the tax year” is given the same meaning as in section 531AL; that is, aggregate income for the purposes of universal social charge.

“aggregate of the tax value of the reduction” is the difference between:

1. the income tax charged having reduced the taxable income by the reduction for foreign tax that could not be given as a credit (under subparagraph (3)(c) of paragraph 7 – i.e. where the foreign effective rate of tax was greater than the Irish effective rate), and having given the credit for foreign tax against income tax, and
2. the income tax that would have been charged if there had been no reduction for foreign tax not given as a credit.

The “Irish taxes” to which this Schedule applies are income tax, income levy, universal social charge and corporation tax. The provisions of this Schedule are also applied, suitably adapted, for the purposes of capital gains tax by virtue of section 828.

“EEA Agreement” is the agreement signed at Oporto on 2 May 1992 between the EU and Norway, Iceland and Liechtenstein, as adjusted by the Protocol signed at Brussels in 1993,

“EEA State” is a state which is a signatory to the above agreement.

“foreign tax” is, in the case of any country with which the Government has entered into a double taxation convention, any tax chargeable under the laws of that country for which credit is allowed under the double taxation convention and, in any other case, any tax chargeable for which credit may be allowed by virtue of paragraph 9A(3).

“relevant Member State” is a Member State of the European Communities, or an EEA State with which Ireland has a double taxation agreement (i.e Norway and Iceland).

par 1(2) References in the section to foreign tax are to be taken as including only the tax of the country with which the arrangements have been made.

General

par 2(1) Where a double taxation convention so allows, credit is to be given against the Irish tax chargeable on foreign source income for foreign tax paid on that same income.

par 2(2) Where the foreign income is within the charge to corporation tax, a similar credit may be claimed.

par 2(2A) In the case of an individual the credit for foreign tax is first to be applied against income tax payable in respect of the foreign income. This ensures that for the purpose of allowing credit for foreign tax against income tax and universal social charge on foreign income, credit must first be given against income tax.

par 2(3) A credit cannot be given in respect of foreign tax unless a double taxation convention so allows.

These general rules are subject to the other provisions of this Schedule. See for example the provisions of Part 2 of this Schedule in relation to unilateral relief.

Requirements as to residence

par 3 Credit for foreign tax can only be given to a person resident in the State for tax purposes subject to paragraphs 9A, 9B and 9C.

Limit on total credit – corporation tax

par 4(1) The credit for foreign tax in respect of any income cannot exceed the amount of Irish corporation tax attributable to that same income. For example, if an Irish resident company has German income from which €1,000 German tax was deducted and the Irish corporation tax on that same income is €800, the credit for the German tax is restricted to €800.

par 4(2) It is the Irish measure of income and gains which determines the amount of corporation tax which the credit for foreign tax must not exceed. The Irish measure of income and gains is the amount of such income and gains computed in accordance with the Tax Acts and the Capital Gains Tax Acts.

par 4(2A) The amount of doubly taxed trading income, where such income arises from a payment from which foreign tax has been deducted (for example, interest subjected to withholding tax that is received by a financial trader) is calculated as a proportion of the net trading income of the company, apportioned on the basis of gross receipts. However, foreign branch profits are excluded from the calculation of the amount of doubly taxed trading income that arises from a payment from which foreign tax is deducted. The actual profits of a foreign branch continue to be taken as a measure of the doubly taxed income.

par 4(4) The basis of attribution of corporation tax is such that it provides the intended result where the “effective” rate of corporation tax differs from the standard rate of corporation tax.

If credit for foreign tax is to be allowed against corporation tax on doubly taxed income which is chargeable at the 25% rate, then the credit for foreign tax is to be limited to an amount equal to 25% of that income. An appropriate reduction in the limit where the income concerned includes income from dealing in residential development land which is taxed at an effective 20% rate, is also provided.

Where a lower corporation tax rate applies t to income from a special investment fund (section 723(6)), an “effective” rate of 20 per cent applies.

Section 713 provides for the taxation of that part of the income and gains of a life assurance company which are reserved for policyholders. Section 738 provides for the taxation of undertakings for collective investment. With regard to both sections, an “effective” rate equal to the standard rate of income tax applies.

Where the corporation tax due is reduced by a fraction under section 644B then the foreign tax credit is also to be reduced by that fraction.

par 4(5) Before attributing corporation tax to any income or gain by reference to the foregoing, the company must allocate all of its deductions which are deductions from profits (see section 4(1)) between the income and gains constituting those profits. The company is entitled to allocate these deductions to its greatest advantage (it could, for example, set deductions primarily against income in respect of which no double taxation relief is due so as to maximise the Irish corporation tax against which foreign tax may be credited or it could also allocate the deductions to the income or gains which suffered the lowest rate of foreign tax).

Whatever the company’s choice is in allocating deductions, all of the deductions must be allocated. This allocation is also being made effective for unilateral credit relief under paragraphs 9D, 9DB and 9DC.

par 4(6) The provisions of subparagraph (5) do not apply to relevant trading charges within the meaning of section 243A.

Limit on total credit – income tax

par 5(1) In most cases, the effective rate of tax is calculated by dividing the total income of the person claiming the credit into the total income tax payable in respect of total income, for example,

In the case of individuals who are subject to the high earner restriction (HER) in Chapter 2A of Part 15 the effective rate of tax is calculated by dividing the adjusted income (as defined in section 485C) of the person claiming the credit into the total income tax payable in accordance with section 485E.

The credit for foreign tax allowable against Irish income tax cannot exceed the sum ascertained by multiplying the amount of the foreign income by the taxpayer’s effective rate of Irish tax on his/her total income.

Effect on computation of income of allowance of credit

par 7(1) to (3) Where credit for foreign tax is to be allowed against any of the Irish taxes in respect of any income, the following applies —

• if the foreign income assessed depends on the amount received in the State (that is, “remittance basis” cases), the amount of such foreign income to be assessed is the aggregate of the amount actually received in the State plus the amount of the credit allowable against Irish tax,
• in non-remittance basis cases —
  • where a credit for the foreign tax is allowable against any of the Irish taxes, no deduction for the foreign tax is to be made in computing the amount of the foreign income for the purposes of income tax,
  • for the purposes of income tax in the case of a dividend on the foreign ordinary stock or of a dividend in excess of the fixed rate on the foreign participating preference stock, the gross amount of the dividend (that is, after adding back the foreign tax charged directly on the dividend) is to be increased by that part of the foreign tax charged on the foreign company’s profits which, under the double taxation relief arrangements, is to be taken into account in the computation of credit,
  • despite the two preceding statements, the foreign tax for which credit cannot be given against either income tax or corporation tax must be allowed as a reduction from the foreign income tax brought into charge for Irish income tax or corporation tax purposes. For corporation tax purposes, the reduction available to a company for an excess of foreign tax cannot exceed the amount of the Irish measure of that foreign tax, as calculated in accordance with subparagraphs (2) and (2A) of paragraph (4).

par 7(4) When calculating the effective rate of Irish income tax —

• in remittance basis cases, the foreign income chargeable is increased by the amount of the foreign tax charged directly on that income (as distinct from, in the final calculation of liability, increasing the net foreign income by the amount of the foreign tax allowable as a credit),
• in non-remittance basis cases, no deduction is made for the foreign tax, and
• in the case of a dividend, no account is taken of the tax borne by the dividend-paying company.

Effect on computation of income of allowance of credit against universal social charge

par 7A(1) Where credit for foreign tax is to be allowed against any of the Irish taxes in respect of any income, the following applies in relation to the computation of the amount of that income for the purposes of universal social charge.

par 7A(2) Where the foreign income is assessed on the basis of remittances to the State the income remitted must, for the purposes of assessment to universal social charge, be treated as increased by the amount of the credit allowable in respect of the foreign tax.

par7A(3)(a) In non-remittance basis cases, where a credit for the foreign tax is allowable against any of he Irish taxes, no deduction for the foreign tax is to be made in computing the amount of the foreign income for the purposes of universal social charge.

par7A(3)(b) In addition, in non-remittance basis cases, for the purposes of universal social charge in the case of a dividend on the foreign ordinary stock or of a dividend in excess of the fixed rate on the foreign participating preference stock, the gross amount of the dividend (i.e. after adding back the foreign tax charged directly on the dividend) is to be increased by that part of the foreign tax charged on the foreign company’s profits which, under the double taxation relief arrangements, is to be taken into account in the computation of credit.

In computing the effective rate of universal social charge under paragraph 5A, the par 7A(4) provisions of subparagraphs (1), (2) and (3) apply. In relation to the foreign income chargeable to universal social charge on the basis of remittances to the State, the income is increased by the amount of the credit allowable as in subparagraph (2). In the case of foreign income chargeable to universal social charge on the basis of the amount arising in the foreign country, no deduction is made for the foreign tax; and in the case of a dividend, the gross amount of the dividend (i.e. after adding back the foreign tax charged directly on the dividend) is to be increased by that part of the foreign tax charged on the foreign company’s profits which, under the double taxation relief arrangements, is to be taken into account in the computation of credit.

Example

Effective rate of USC 3,077 / 53,689 = 5.7%

This is also the same calculation for the final liability to USC. Unlike the regrossing computation for calculating the final liability to income tax the USC computation is based on the USC attributable to the foreign income. This is because USC is computed on aggregate income, which is the aggregate of an individual’s relevant emoluments, and relevant income for the year. Relevant income is income as estimated in accordance with the Tax Acts, without regard to any amount deductible from or deductible in computing total income. Therefore, the reduction envisaged in paragraph 7(3)(c) which is calculated in the regrossing computation is not allowable for the purposes of USC.

Note also that for the purposes of USC where credit is also allowable for underlying tax in the case of foreign dividends the gross dividend including the underlying tax is included in the USC computation. This also follows the premise that the USC computation does not encompass regrossing as is done in the income tax computation whereby a reduction for tax not used as a credit is provided.

Special provisions as to dividends

par 8(1) & (2) In determining the appropriate proportion of the foreign tax of the dividend paying company which is to be attributed to a foreign dividend for the purposes of credit relief, the tax is to be that appropriate to the “relevant profits” (that is, the profits for the period out of which the dividend is paid, or the specified profits out of which it is paid: or where the dividend is not expressed to be paid for any period or out of any specified profits, it is to be treated as paid out of the profits of the company for the last period, ended before the dividend became payable, for which accounts were made up).

In circumstances where a dividend exceeds the profits of the period for which it is (or is treated as having been) paid, the profits represented by the dividend are to be taken as being the profits of that period plus so much of the available profits of the immediately preceding period or periods as is equal to the excess. The profits of the most recent preceding period are first to be taken into account; then (where necessary) those of the next most recent preceding period; and so on.

par 9 In the case of an Irish company which receives a fixed rate dividend (for example, a non-participating preference dividend) from a foreign company in which the Irish company controls not less than one-half of the voting power, the foreign tax paid by the dividend-paying company on its relevant profits is to be taken into account in considering the credit allowable to the recipient company in respect of that dividend. In other words, the fixed rate dividend is deemed in such exceptional circumstances to be in the nature of an ordinary dividend.

Unilateral Relief

par 9A(1) Unilateral credit relief may be given where a parent company, which is resident in the State, receives a dividend from its subsidiary in respect of which tax has been paid in a country with which Ireland does not have a tax treaty.

The relief is given by allowing the foreign tax as a credit against the Irish corporation tax, even though there is no tax treaty in place between Ireland and the country concerned.

par 9A(2) The amount of the relief is calculated as if a tax treaty was in place with the country concerned. This “notional treaty” is one containing the provisions set out in paragraph 9A(3) to (5). References in this Schedule to credit being given under tax treaties are to be regarded as including references to unilateral relief.

par 9A(3) The corporation tax against which the credit is allowed is the Irish corporation tax attributable to a company’s (included in subparagraph (3A)) profits represented by the dividend.

par 9A(3A) A company is included in this subparagraph if it is resident in the State or resident in a ‘relevant Member State’ and the dividend referred to above forms part of the profits of a branch or agency within the State.

par 9A(3B) Where a payment is made under the law of a foreign territory to any person by reference to tax paid in relation to a dividend paid by a company in a foreign territory, then the amount of the credit attributable to the profits represented by the dividend which is to be allowed against corporation tax is to be reduced by an amount equal to the amount of the payment.

par 9A(4) The foreign tax on the dividend means —

• any withholding tax on the dividend paid, and
• tax paid in the territory concerned by the company paying the dividend on its profits in so far as the tax is properly attributable to the proportion of the profits represented by the dividend.

Relief is only given in respect of a “relevant dividend” which is defined as a dividend paid by a non-resident company to a company included in subparagraph (3A).

par 9A(5) However, credit will not be given —

• for any tax paid in a tax treaty country except to the extent to which it cannot be credited in accordance with the relevant tax treaty,
• for any foreign tax which is taken into account in calculating the existing unilateral credit relief under paragraph 9D of this Schedule,
• for any tax in respect of which credit is given under section 831 which implemented in Ireland the EU Parent/Subsidiaries Directive.

par 9A(6) Provision is made to enable assessments to be made or amended to ensure that the correct amount of credit is given.

par 9A(7) Finally, the only foreign tax for which credit will be given is tax charged on income or capital gains which corresponds to corporation tax or capital gains tax.

Dividends paid between related companies: relief for Irish and third country taxes

Paragraph 9B provides that credit is allowed against Irish corporation tax on dividends received by a relevant company from a foreign related company for tax paid by that foreign company and its subsidiaries provided the foreign company is —

• a 5% subsidiary of the company to which it pays the dividends, and
• a 5% subsidiary of the ultimate Irish parent.

This is achieved in a stepped way. Subparagraph (1) deals with allowing a credit for tax paid by a foreign company (F Ltd) to the relevant company. Subparagraph (2) provides that tax paid by a subsidiary (S Ltd) of the foreign company will be treated as paid by the foreign company so as to be able to be set against Irish corporation tax of the relevant company. Subparagraph (3) provides that tax paid by a subsidiary (SS Ltd) of S Ltd will be treated as paid by S Ltd so as to be pushed up through F Ltd to be set against the Irish corporation tax of the relevant company. This process applies down through any number of tiers of companies as long as the company concerned is a 5% subsidiary of the one above it in the chain.

par 9B(5)(b) For the purposes of this paragraph —

• one company is related to another if that other company directly or indirectly controls, or is a subsidiary (i.e. directly or indirectly owns at least 50% of the ordinary share capital) of a company which directly or indirectly controls, at least 5% of the voting power in the first company,
• one company is connected to another if that other company directly or indirectly controls, or is a subsidiary of a company which directly or indirectly controls, at least 5% of voting power in the first company.

par 9B(1) In the case of a dividend payment by a foreign company to a relevant company, credit to be given will take account of certain tax paid by the foreign company and which is attributable to the profits represented by the dividend. The tax concerned is —

• any income tax or corporation tax paid in the State by the foreign company, this could arise where, for example, the company trades in the State through a branch or agency, and
• any tax paid by the company under the law of any territory other than the State. This includes tax paid by the foreign company in the territory in which it is resident and tax paid by it in any other territory.

A company that falls within this subparagraph is known as a “relevant company”. It must be resident in the State or resident in a Member State of the EU or resident in a Member State of the EEA with which Ireland has a tax treaty.

par 9B(1A) The foreign company is to be treated as having paid certain tax for the purposes of giving credit where it receives a dividend from a third related company. The tax to be treated as paid is underlying tax paid by the related company if that underlying tax would have been creditable against Irish corporation tax if the foreign company had been resident in the State.

par 9B(5)(a) Underlying tax in relation to a dividend is defined as tax borne by the company paying the dividend on relevant profits in so far as it is attributable to the proportion of the profits represented by the dividend. This includes both tax on the profits and any underlying tax suffered on a dividend coming in to that company.

par 9B(3) Where the third company itself receives a dividend from its related companies, it will be regarded as having paid tax borne by those companies. As a result, that tax can be treated as paid by the company above it, and so on up the chain so that the Irish resident parent can get relief for an appropriate part of foreign tax paid by foreign companies which are members of the group.

par 9B(4) Limitations on this relief are as follows —

• no tax is to be taken into account in respect of a dividend paid by an Irish resident company except corporation tax payable in the State and any tax for which the company is entitled to double taxation relief under this Schedule. This covers a situation where an Irish parent company (P Ltd) has a foreign subsidiary (S Ltd) which in turn has an Irish subsidiary (SS Ltd). The Irish tax paid by SS Ltd will reduce the tax paid by S Ltd. The credit against tax charged on P Ltd will be the aggregate of the tax paid by S Ltd (which will be net of the Irish tax paid by SS Ltd) and that paid by SS Ltd.
• a foreign company (F1 Ltd) to which tax paid by its subsidiary (F2 Ltd) is being brought up may only have tax taken into account if the tax could have been credited had F1 Ltd been resident in the State (i.e. either a double tax treaty exists or unilateral credit is available).

par 9C This paragraph allows for a credit on foreign tax paid by a company which is resident in another EU Member State and which has an Irish branch. The credit will be the same as that currently afforded to Irish resident companies under a tax treaty. The tax which may be credited does not, however, include tax paid in the company’s country of residence.

par 9D This paragraph gives unilateral credit relief for withholding tax (referred to in the paragraph as “relevant foreign tax”) suffered in countries with which Ireland does not have a tax treaty on interest (referred to in the section as “relevant interest”) which falls to be taken into account in computing trading income of the company which receives it.

This paragraph provides for a reduction in Irish corporation tax on relevant interest in respect of the relevant foreign tax borne. Under general computational rules the foreign tax suffered is deducted in calculating the company’s trading income. Such a deduction results in a reduction in corporation tax the amount of which will depend on the corporation tax rate.

For example, if foreign tax of is €100, a deduction of €100 is allowed in calculating trading income, this income will result in a tax saving of €12½ where the corporation tax rate is 12½ %. Consequently, €87½ (or 87½ %) of the foreign tax remains to be credited. Unilateral relief is given as a percentage of the foreign tax or, if less, the amount of Irish corporation tax attributable to the doubly taxed leasing payment. This is the standard approach in relation to relief from double taxation.

“relevant foreign tax” is defined, in relation to any interest, as tax, corresponding to income tax or corporation tax, which has been deducted from the interest and has not been repaid, for which credit is not allowed under a tax treaty and which is not treated under this Schedule as reducing the company’s income.

“relevant interest” is defined as interest receivable by a company which falls to be taken into account in computing the company’s trading income and from which relevant foreign tax has been deducted.

Corporation tax attributable to an amount of relevant interest is determined by applying the standard corporation tax rate to the amount of income of the company referable to the amount of the relevant interest. Income of a company referable to the amount of relevant interest is determined by apportioning the company’s trading income between income from relevant interest and other income on the basis of relevant interest receivable in the accounting period and other amounts receivable in the course of the trade in the accounting period. This can be calculated by a formula as follows:

Unilateral relief for branch profits

Unilateral credit relief may be given where foreign tax is suffered by a company that has a branch in a country with which Ireland does not have a treaty.

The relief is given by allowing the company to set the foreign tax on its branch income against the Irish tax on that income.

par 9DA(2) The amount of the relief is calculated as if a tax treaty was in place with the country concerned. This “notional treaty” is one containing the provisions set out in subparagraphs (3) to (5). References in this Schedule to credit being given under tax treaties are to be regarded as including references to unilateral relief.

par 9DA(3) The corporation tax against which the credit is allowed is the Irish corporation tax attributable to the income of the foreign branch.

par 9DA(4) A company is included in this subparagraph if it is resident in the State or resident in a ‘relevant Member State’ and the income referred to above forms part of the income of a branch or agency of the company in the State.

par 9DA(5) However, credit will not be given —

• for any tax paid in a country that can be credited under a tax treaty between that country and Ireland, and
• for any foreign tax which is taken into account in calculating the existing unilateral credit relief paragraph 9D of this Schedule.

par 9DA(6) Provision is made to enable assessments to be made or amended to ensure that the correct amount of credit is given.

par 9DA(7) Finally, the only foreign tax for which credit will be given is tax charged on income or capital gains which corresponds to Irish corporation tax or capital gains tax.

Unilateral Relief for royalty income

par 9DB Unilateral credit relief may be given for withholding tax (referred to in the paragraph as “relevant foreign tax”) suffered in countries with which Ireland does not have a tax treaty on royalties, (referred to in the paragraph as “relevant royalties”) which fall to be taken into account in computing trading income of the company which receives it.

The relief is given by allowing a reduction in Irish corporation tax on relevant royalties in respect of the relevant foreign tax borne. Under general computational rules the foreign tax suffered is deducted in calculating the company’s trading income. Such a deduction results in a reduction in corporation tax of 12.5%.

For example, if foreign tax of €100 is suffered, a deduction of €100 in calculating trading income will result in a tax saving of €12.50 or 12½ %. Consequently, €87.50 (or 87½ %) of the foreign tax remains to be credited. Relief is given as a percentage of the foreign tax or, if less, the amount of Irish corporation tax attributable to the doubly taxed relevant royalty. This is the standard approach in relation to relief from double taxation.

Definitions

par 9DB(1)(a) “relevant foreign tax” is defined, in relation to any royalty, as tax corresponding to income tax or corporation tax, which has been deducted from the royalty and has not been repaid, for which credit is not allowed under a tax treaty and which is not treated under this Schedule as reducing the company’s income.

“relevant royalties” are defined as royalties receivable by a company which fall to be taken into account in computing the company’s trading income and from which relevant foreign tax has been deducted.

The meaning of “royalties” is set out.

par 9DB(1)(b) Corporation tax attributable to an amount of relevant royalties is determined by applying the standard corporation tax rate to the amount of income of the company referable to the amount of the relevant royalty. Income of a company referable to the amount of relevant royalty is determined by apportioning the company’s trading income between income from relevant royalties and other income on the basis of relevant royalties receivable in the accounting period and other amounts receivable in the course of the trade in the accounting period. This can be calculated by a formula as follows:

Pooling

Any foreign tax, which cannot be treated as reducing income by virtue of a double taxation treaty or under the unilateral relief provision, due to an insufficiency of income, may be used to reduce the income referable to other foreign trading royalty income.

par 9DB(4) Where relevant royalties are received in an accounting period by a company and any part of the foreign tax on those royalties cannot be relived by virtue of a double taxation treaty or under unilateral relief due to an insufficiency of income then that unrelieved amount shall be “unrelieved foreign tax” for the purposes of paragraph 9DB.

par 9DB(5) Where, as respects an accounting period of a company, the trading income of a company includes royalties from persons not resident in the State the company may-

1. reduce the foreign royalty income by any unrelieved foreign tax, and
2. allocate such reductions in such amounts and to such of its foreign royalty income for that accounting period as it sees fit.

par 9DB(6) The aggregate amount of reductions under subparagraph (5) cannot exceed the aggregate of the unrelieved foreign tax in respects of all relevant royalties for an accounting period.

Unilateral Relief for leasing income

par 9DC Unilateral credit relief may be given for withholding tax (referred to in the paragraph as “relevant foreign tax”) suffered in countries with which Ireland does not have a tax treaty on leasing income, (referred to in the paragraph as “relevant leasing income) which fall to be taken into account in computing trading income of the company which receives it.

The relief allows for a reduction in Irish corporation tax on relevant leasing income in respect of the relevant foreign tax borne. Under general computational rules the foreign tax suffered is deducted in calculating the company’s trading income. Such a deduction results in a reduction in corporation tax of 12.5%.

For example, if foreign tax of €100 is suffered, a deduction of €100 in calculating trading income will result in a tax saving of €12.50 or 12½ %. Consequently, €87.50 (or 87½ %) of the foreign tax remains to be credited. Unilateral relief is given as a percentage of the foreign tax or, if less, the amount of Irish corporation tax attributable to the doubly taxed leasing payment. This is the standard approach in relation to relief from double taxation.

“Relevant foreign tax” is defined, in relation to leasing income, as tax corresponding to income tax or corporation tax, which has been deducted from the lease payment and has not been repaid, for which credit is not allowed under a tax treaty and which is not treated under this Schedule as reducing the company’s income.

“Relevant leasing income” is defined as leasing income receivable by a company which fall to be taken into account in computing the company’s trading income and from which relevant foreign tax has been deducted.

The meaning of “leasing income” is set out.

Corporation tax attributable to an amount of relevant leasing income is determined by applying the standard corporation tax rate to the amount of income of the company referable to the amount of the relevant leasing income. Income of a company referable to the amount of relevant leasing income is determined by apportioning the company’s trading income between income from relevant leasing income and other income on the basis of relevant leasing income receivable in the accounting period and other amounts receivable in the course of the trade in the accounting period. This can be calculated by a formula as follows:

par 9DC(3) Where foreign tax is incurred in respect of a separate stream of leasing income, and that tax cannot be fully relieved against the corporation tax attributable to that stream of leasing income in the current year, then the excess foreign tax may be carried forward for relief against income from the same stream of leasing income in future years.

In order to allow unrelieved foreign tax (i.e. treaty country, foreign tax) or unrelieved relevant foreign tax (i.e. non-treaty country, foreign tax) to be carried forward, it is necessary to identify, for the purposes of subparagraph (4), the amount of such unrelieved tax.

In the case of unrelieved foreign tax (i.e. tax borne in a tax treaty country) the amount to be treated as unrelieved foreign tax for the purposes of subparagraph (4), is –

• the amount of the foreign tax that has not been allowed as a reduction against income nor allowed as a credit under the general rules of this Schedule, and
• 87.5 per cent of the amount of the foreign credit which under paragraph 7(3)(c) has been allowed as a reduction against leasing income.

For example, if foreign tax is €100 and the leasing income is €75, then the unrelieved foreign tax is €90.62 (made up of €25 i.e. the amount that is neither allowed as a reduction or as a credit) plus €65.62 (i.e. 87½ % of the foreign tax that has been allowed as a credit under paragraph 7(3)(c)). The reason 87.5% of the foreign tax is used is because the value of the reduction will equate to 12.5% of the foreign tax allowed in reducing the foreign income chargeable to Irish tax.

In the case of unrelieved relevant foreign tax (i.e. tax borne in a non-treaty country), the amount to be treated as unrelieved relevant foreign tax for the purposes of subparagraph (4), is the amount by which 87.5% of the relevant foreign tax which is deducted from the leasing income, or treated as so deducted under subparagraph (4), exceeds the corporation tax attributable to that leasing income.

For example, if relevant foreign tax is €75 and the leasing income is €100, then the unrelieved foreign tax is €65.62 (i.e. 87.5% of €75); 12.5% of the relevant foreign tax will already have been effectively relieved by way of a deduction.

par 9DC(4) Unrelieved foreign tax or unrelieved relevant foreign tax on leasing income may be carried forward into the next accounting period and is deemed to be foreign tax or relevant foreign tax of that period for the purposes of the Corporation Tax Acts. Accordingly, the unrelieved foreign tax or unrelieved relevant foreign tax carried forward is deductible in computing the income as well as creditable against Irish tax, relating to the same stream of leasing income arising in subsequent accounting periods.

Treatment of unrelieved foreign tax

Pooling

par 9E(2)(c) & (3)(d) Where the foreign tax suffered exceeds the Irish tax on the dividend the excess may be offset against Irish tax on other foreign dividends and any unrelieved amounts may be carried forward. These pooling arrangements apply separately to dividends that are taxable at the 25% rate and to dividends that are taxable at the 12½% rate. Any surplus of foreign tax arising on dividends taxable at the 12½% rate is not available for offset against tax on dividends taxable at the 25% rate. There is a similar restriction in the case of dividends taxable at the 25% rate.

par 9E(1)(a) “foreign company” is defined as a company resident outside the State.

par 9E(1)(a) “unrelieved foreign tax” has the meaning given to it in subparagraph (2), i.e. foreign tax that cannot be relieved against Irish tax on dividends concerned.

par 9E(1)(a) “unrelieved foreign tax in respect of specified dividends” has the meaning given to it in subparagraph (3), i.e. foreign tax that cannot be relieved against Irish tax on the specified dividends concerned. Specified dividends are dividends that are taxable at the 12.5% rate. This is defined in subparagraph (3).

par 9E(1)(b)(i) A dividend is regarded as a “relevant dividend” if it is received from a non-resident company and the receiving company has a holding of 5% in the dividend paying company.

par 9E (1)(b)(ii) The aggregate amount of corporation tax payable by a company for an accounting period in respect of relevant dividends received by the company in the accounting period from foreign companies is the tax that would not have been payable if the company had not received those dividends.

par 9E(2) Provision is made to deal with foreign dividends that are chargeable to tax at the 25% rate. Dividends chargeable at the 12.5% rate are dealt with in subparagraph (3).

par 9E (2)(a) The meaning of unrelieved foreign tax is set out. As the income will have been reduced by the surplus foreign tax under the general rules of Schedule 24, the company will have received a tax benefit equal to 25% of the surplus. Consequently, only the other 75% of the surplus tax may be set against tax on other foreign dividends. The 75% is determined by way of a formula. This ensures that the provision will continue to operate appropriately even in the event of a change in the 25% corporation tax rate. The formula applied to the surplus foreign tax is as follows-

In a situation where R is the rate of tax specified in section 21A and D is the surplus foreign tax, this means that 75% of the surplus foreign tax is available for offset.

par 9E(2)(b) Unrelieved foreign tax is to be set off against corporation tax payable by the company on other foreign dividends received by it in the accounting period, irrespective as to whether those other dividends are taxable at the 12.5% or the 25% rate.

par 9E(2)(c) Where unrelieved foreign tax cannot be fully offset under clause (b), it can be carried forward and treated as unrelieved corporation tax of the following accounting period for offset in that accounting period against corporation tax payable by the company in respect of relevant dividends received in that accounting period.

par 9E(3)(a) Provision is made to deal with foreign dividends that are chargeable to tax at the 12.5% rate. These are described as specified dividends.

par 9E(3)(b) The meaning of unrelieved foreign tax as respects a specified dividend is set out. As the income arising from that dividend will already have been reduced by the surplus foreign tax under the general rules of Schedule 24, the company will have received a tax benefit equal to 12.5% of the surplus. Consequently, only the other 87.5% of the surplus tax may be set against tax on other specified dividends. Again, the 87.5% is determined by way of a formula. The formula applied to the surplus foreign tax is as follows-

In a situation where R is the rate of tax specified in section 21 and D is the surplus foreign tax, this means that 87.5% of the surplus foreign tax is available for offset.

par 9E(3)(c) Unrelieved foreign tax in respect of a specified dividend is to be set off against corporation tax payable by the company on other specified dividends received by it in the accounting period.

par 9E(3)(d) Where unrelieved foreign tax in respect of a specified dividend cannot be fully offset under clause (c), it can be carried forward and treated as unrelieved corporation tax in respect of specified dividends of the following accounting period for offset in that accounting period against corporation tax payable by the company in respect of specified dividends received in that accounting period.

par 9F This paragraph is concerned with giving relief to a company for foreign tax on interest received by the company from an associated company in a country with which Ireland has a double tax treaty in force or has signed a double tax treaty which has yet to come into force. Where a company receives such interest, the foreign tax may be offset against Irish corporation tax on the interest. Where the foreign tax exceeds the Irish tax, this paragraph allows the surplus tax to be credited against tax on other interest from associated companies, if the interest is sourced in a tax treaty country.

par 9F(1)(a) “the aggregate amount of corporation tax payable by a company for an accounting period in respect of relevant interest of the company for the accounting period from foreign companies” is the tax that would not have been payable if the interest had not been chargeable to tax.

“foreign company” is a company resident outside the State.

“foreign tax” is tax corresponding to income tax or corporation tax that has been deducted outside the State from the interest payment to the company, and which has not been repaid to the company.

“unrelieved foreign tax” is the tax that cannot otherwise be offset and is defined in subparagraph (2).

par 9F(1)(b) Interest receivable by a company is regarded as relevant interest if it is taken into account in computing trading income (i.e. the company carries on a financial trade), if it is sourced in a country with which Ireland has a double tax treaty, and if the company paying the interest and the company receiving the interest are associated: The relationship between the two companies is determined in terms of one being a 25% subsidiary of the other, or both being 25% subsidiaries of a third company – for the purposes of the provision, the 25% relationship is strictly determined in terms of actual beneficial entitlement to profits or assets, as opposed to any artificial relationship between the two companies.

par 9F(2) The meaning of unrelieved tax on relevant interest received in an accounting period is set out. Under the general rule, where foreign interest is received, it is chargeable to Irish tax. The Irish tax is reduced by the foreign tax. If the foreign tax exceeds the Irish tax the excess is treated as reducing the income concerned. This subparagraph allows a part of the foreign tax that has so reduced the income to be offset against Irish tax on other similar foreign interest received in the accounting period.

As the income is reduced by the surplus foreign tax, the company will have received a tax benefit equal to 25% of the surplus. Consequently, only the other 75% of tax surplus may be set against tax on other similar foreign interest. The 75% is determined by way of the following formula:

In a situation where R is the rate of tax and D is the surplus foreign tax, this means that 75% of the surplus foreign tax is available for offset.

par 9F(3) Unrelieved foreign tax of an accounting period may be offset against corporation tax payable by the company in respect of relevant interest received by the company in the accounting period.

Pooling for branch profits

par 9FA This paragraph is concerned with the pooling of certain double taxation relief arising from foreign tax on branch income. Where a company receives foreign income and the foreign tax suffered exceeds the Irish tax on the foreign branch income the excess may be offset against Irish tax on other foreign branch income of the year concerned.

par 9FA(1) “the aggregate amount of corporation tax payable by a company for an accounting period in respect of foreign branch income of the company for the accounting period” is the tax that would not have been payable if that income had not been chargeable to tax.

“foreign branch” is a branch or agency of a company in a foreign territory through which the company carries on a trade in that territory.

“foreign branch income” is the income of the company that is attributable to a foreign branch.

“foreign tax” is tax paid in a foreign territory or income of a company from a branch or agency in that territory and which corresponds to corporation tax.

par 9FA(2) The meaning of unrelieved tax on foreign branch income in an accounting period is set out: Under the general rule, the foreign branch income is chargeable to Irish corporation tax. The Irish tax is reduced by the foreign tax suffered on that income. If the foreign tax exceeds the Irish tax the excess is treated as reducing the income concerned. This subparagraph allows a part of the foreign tax that has so reduced the income to be offset against Irish corporation tax on other foreign branch income of the accounting period.

As the income is reduced by the surplus foreign tax, the company will have received a tax benefit in respect of that foreign tax. The benefit received will depend on the rate applicable to the income concerned. If the income is taxable at the 12½% rate, the tax benefit will be equal to 12½% of the surplus. Consequently, only the other 87½% of tax surplus may be set against tax on other foreign branch income. The 87½% is determined by way of the following formula:

In a situation where R is the rate of tax relevant to the income concerned and D is the surplus foreign tax, this means that 87½% of the surplus foreign tax is available for offset.

par 9FA (3) Unrelieved foreign tax of an accounting period may be offset against corporation tax payable by the company in respect of foreign branch income of the company in the accounting period.

Unilateral relief for capital gains tax

par 9FB(1) Unilateral credit relief may be given where foreign capital gains is paid in a country with which Ireland has a tax treaty but that treaty does not cover taxes on capital gains because the treaty was agreed before the introduction of capital gains tax in Ireland.

The relief is given by allowing the foreign tax payable on the gain to be offset against Irish capital gains on the gain.

par 9FB(2) The amount of the relief is what would be given if the tax treaty with the territory contained the provisions set out in subparagraphs (3) and (4). References in this Schedule to credit being given under tax treaties are to be regarded as including references to unilateral relief.

par 9FB (3) The capital gains tax against which the credit is allowed is the Irish capital gains tax computed by reference to the gain. Where a gain is included in profits for corporation tax purposes, the foreign tax on the gain is credited against corporation tax computed by reference to the gain.

par 9FB(4) However, credit will not be given —

• for any tax paid in a country that can be credited under a tax treaty between that country and Ireland, and
• to the extent that credit may be given for the tax under any other provision of this Schedule.

par 9FB(5) Provision is made to enable assessments to be made or amended to ensure that the correct amount of credit is given.

par 9FB(7) Finally, the countries in respect of which unilateral relief is to be given for tax paid on capital gains in those countries against Irish tax are set out. These are the Kingdom of Belgium, Cyprus, the Republic of France, the Italian Republic, Japan, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, Pakistan and Zambia.

Dividends paid by companies that are taxed as a group under the law of a territory outside the State

par 9G This paragraph sets out the mechanism for relieving double taxation where a dividend is received from a foreign company that is a member of a group that is taxed on a consolidated basis.

par 9G(1) The paragraph applies where there is a group of companies that is treated as a single taxable entity under the laws of a territory outside the State, and a dividend is paid either by one of the group companies to a company outside the group, or by a company outside the group to one of the group companies.

par 9G(2)(a) The consolidated group is treated as if it were a single dividend paying or dividend receiving company for the purposes of giving double taxation relief under Schedule 24. In particular, the rules provide that:

• all companies in the group are treated as a single company,
• any dividend paid by a group company to a company outside the group is treated as if the single company paid it,
• any dividend received by a group company from a company outside the group is treated as if the single company received it,
• if a dividend-paying group company is related to the company that receives the dividend, then the single company is treated as if it is related to the recipient,
• if a dividend-paying group company outside the group is related to the group company that receives the dividend, then the dividend-paying company is treated as if it is related to the single company,
• the single company is treated as being resident in the territory where the tax for the consolidated group is paid, and
• the profits out of which any group dividends are paid is a single aggregate figure, and the foreign tax is the figure used for the group in its consolidated return.

par 9G(2)(b) Additional rules that allow the provisions of Schedule 24 to operate in relation to a single company provide for three things:

• for the purposes of paragraph 9B of the Schedule, a single company is treated as being connected to an Irish company if the group company that paid the dividend to the Irish company is so connected,
• for the purposes of paragraph 9A of the Schedule, a relevant dividend paid by a group company is treated as if it were a relevant dividend paid by the single company, and
• for the purposes of paragraph 8 of the Schedule, a single company is treated as if it were a body corporate.

Dividends paid out of transferred profits

par 9H Provision is made for double tax relief in cases where the profits of one company become the profits of another company other than by the payment of a dividend. The relief applies where:

• a foreign company (the first company) pays foreign tax in respect of its profits,
• some or all of those profits become the profits of another foreign company (the second company) other than by the payment of a dividend, and
• the second company pays a dividend to another company (either another foreign company or an Irish company) out of the profits.

Where the conditions for obtaining relief are satisfied and the second company or another foreign company pays a dividend to an Irish company, credit (in accordance with the rules in Schedule 24) can be allowed to the Irish company in respect of the tax paid by the first company as if it had been paid by the second company.

The extent of the relief is limited in two ways:

• credit allowed to the Irish company is limited, where appropriate, to the amount that would have been due had the profits been transferred instead by way of a dividend, and
• no relief is available where the profits transfer from the first company to the second company is part of a tax avoidance scheme.

Dividends: Additional credit

par 9I This paragraph provides for an additional credit for foreign tax on certain foreign dividends. The additional foreign credit for tax allows for increased double taxation relief when the existing credit for foreign tax on the relevant dividend is less than the amount that would be computed by reference to the nominal rate of tax in the country from which the dividend is paid.

Definitions

par 9I(1) “excluded dividend” means a dividend, or part of a dividend, paid by a company resident in an EU Member State or an EEA State with which Ireland has a double taxation agreement, in so far as the dividend is paid out of profits of the company that:

• have not been subject to tax, and
• have been received, directly or indirectly, from a connected company not resident in a non EU Member State or EEA treaty partner state from profits which have not been subject to tax.

“relevant company” is a company resident in the State or is a branch in the State of a company resident in an EU Member State or an EEA State with which Ireland has a double taxation agreement (i.e. Iceland and Norway).

“relevant dividend” is a dividend, other than an excluded dividend, or a dividend from portfolio investments (that is, holdings of less than 5%) which forms part of the trading income of a company and is exempt from corporation tax in the same manner as Irish domestic dividends are exempt.

“source company” is a company not resident in the State which is resident for tax in an EU Member State or an EEA State with which Ireland has a double taxation agreement.

“tax” is tax, imposed in a foreign country which equates to corporation tax or to income tax that is deducted from dividends or distributions of profits. However, for the purpose of the definition of “excluded dividend”, the meaning of ‘tax’ does not include such tax charged where most of the value of a dividend has been exempt from tax.

par 9I(2) The rules for attributing relevant profits to specific periods or specific profits are set out in the paragraph. Relevant profits are the profits for the period out of which the dividend is paid, or the specified profits out of which it is paid. Where the dividend is not expressed to be paid for any period or out of any specified profits, it is to be treated as paid out of the profits of the company for the last period for which accounts were made up ended before the dividend became payable.

In circumstances where a dividend exceeds the profits of the period for which it is (or is treated as having been) paid, the profits represented by the dividend are to be taken as being the profits of that period plus so much of the available profits of the immediately preceding period or periods as is equal to the excess. The profits of the most recent preceding period are first to be taken into account; then (where necessary) those of the next most recent preceding period; and so on.

par 9I(3) Where a source company pays a relevant dividend to a relevant company, then for the purposes of allowing credit against corporation tax for foreign tax in respect of the dividend, an additional foreign credit, calculated in accordance with subparagraph (4), and subject to subparagraph (5), is to be taken into account. The credit for foreign tax in respect of a relevant dividend cannot exceed the amount of Irish corporation tax attributable to that dividend in accordance with paragraph 4 of the Schedule.

par 9I(4) The additional foreign credit is to be calculated by the use of a formula as follows –

(A × B) – C

In a situation where –

The subparagraph provides for separate computations depending on whether the dividend is taxed at the 12½% rate or 25% rate.

Examples of the computation of the additional credit are set out below.

1. Example where the foreign nominal tax rate is lower than the Irish rate of tax:

Gross Dividend = €1100

Net Dividend = €1000

Foreign Tax = €100

Irish Tax = 12.5%

Foreign Nominal = 10%

Additional foreign credit due in accordance with paragraph 9I:

(A x B) – C

(€1100 x 10% = €110) – €100 = €10 additional credit due.

2. Example where the foreign nominal tax rate is higher than the Irish rate of tax:

Gross Dividend = €1200

Net Dividend = €1000

Foreign Tax = €200

Irish Tax = 12.5%

Foreign Nominal = 20%

Where the foreign nominal rate is higher than the Irish rate, the credit relief available is quantified by regrossing the Irish measure of the dividend at the Irish effective rate.

€1000 x 100/87.5 = €1,143

Additional foreign credit due in accordance with paragraph 9I:

(A x B) – C

(€1,143 x 12.5% = €143) – 143 = €0 additional credit due.

An example of the interaction of additional foreign credit and the revised DTA computation required by paragraph 7(3)(b) is set out below.

3. Example where the foreign nominal tax rate is lower than the Irish rate of tax:

Step 1. Calculate the additional foreign credit due in accordance with paragraph 9I. Using the same figures as per example 1 above, the additional foreign credit is €10.

Step 2. The additional credit is included as income in accordance with paragraph 7(3)(b):

Step 3. A further recalculation of the additional foreign tax credit is required and is as follows:

A is €1110 (€1100 + €10)

B is €10

C is €110

Applying the formula (A x B) – C

(€1110 x 10%) = €111 – €110 = €1

Revised additional foreign tax credit is €11 (€10 + €1)

Step 4. The additional credit is then included as income in accordance with paragraph 7(3)(b) and the tax is recalculated:

par 9I(4A)(a) In computing the additional foreign credit in clause (a) or (b) of subparagraph (4), and where the profits of source company have not been subject to tax, but are attributable to the profits of a company that have been subject to tax, then the rate per cent of tax which is to be used in the formulae is the rate per cent applicable to the profits that have been subject to tax. This will require the source company to trace back its profits that are attributable indirectly through other dividend paying companies to profits that have been subject to tax.

An example of where profits have not being subject to tax is where the profits out of which a relevant dividend is paid are profits that have been untaxed due to the operation of a participation regime (i.e. total exemption from tax for dividends) or a franked investment income regime.

Profits not subject to tax would not include profits of a company that have been fully extinguished by a claim for group relief. In such circumstances the rate per cent of tax for the purposes of the formulae in subparagraph (4) is the nominal rate of tax in the source company’s location that corresponds to corporation tax in the State.

par 9I(4A)(b) Provision is made for the calculation of the additional foreign credit where the dividend paid to the Irish company is derived from various incomes of the paying company, including its own earned profits that have been subject to tax, as well as dividends received from one or more sources. For the purposes of calculating the additional foreign credit, the dividend is disaggregated into its component parts and treated as separate dividends. Accordingly, for the purposes of the formulae, the appropriate rate per cent of tax applicable to the profits that have been subject to tax for each separate dividend will be used. The aggregate value of the parts of the relevant dividend as disaggregated cannot exceed the value of the dividend.

par 9I(4A)(c) Provision is also made for the attribution of profits of a company received by a company, directly or indirectly, by the payment of a dividend. Profits are only attributed once to the same amount of a stream of profit flowing by dividend or distribution through more than one country on its way to being paid as a cross-border dividend into Ireland.

par 9I(5) Any unrelieved additional foreign credit may not be pooled or carried forward against corporation tax on other dividends.

par 9I(6) Dividends paid out of transferred profits are not eligible for additional foreign credit under this paragraph. Transferred profits describe a situation where the profits of one foreign company become the profits of another company other than by way of a dividend. This would be the case, for example, with a merger of companies.

Miscellaneous

par 10 A person may elect not to accept credit for the foreign tax against his/her Irish taxes. In that event, the “direct” foreign tax borne on the foreign income would generally be allowable as a deduction in arriving at the foreign income chargeable to Irish tax.

par 11 While the Schedule allows for the raising of an amended assessment under Case IV of Schedule D to correct errors in respect of —

• foreign income under assessed, or
• an incorrect credit for foreign tax,

the figures in the original assessment can, under Part 41 (“Self Assessment”), be amended to take account of such errors without the need to raise an amended assessment.

par 12(1) In the Schedule —

• “the relevant year of assessment” for the purposes of attaching a credit for foreign tax to particular income means the year of assessment for which that income is chargeable, or would be so chargeable, to income tax, and
• “the relevant accounting period” for the purposes of attaching a credit for foreign tax to particular income means the accounting period for which that income is chargeable, or would be so chargeable, to corporation tax.

par 12(2) Claims for an allowance by way of a credit for foreign tax must be made in writing to the inspector within 6 years after the end of the relevant year of assessment or relevant accounting period.

If a person is aggrieved by a decision of an inspector in relation to a claim for relief, such a decision may be appealed by way of notice in writing to the Appeal Commissioners. An appeal must be made within 30 days after the date of the notice of that decision. The appeal is heard and determined in the manner provided for in Part 40A.

par 13 In cases where there may be protracted delay in this country or in the foreign country in arriving at the correct tax liability and, on the final computation of liability, it is found that adjustments upwards or downwards are necessary in credit relief already given on the basis of inconclusive figures, any further relief necessary may be claimed, or amended assessments made, despite the fact that the normal time-limits may have expired.

However, the amended assessment must be made and additional reliefs claimed within 6 years from the time all assessments, adjustments, etc have been made as are material in determining the extent to which credit is allowable.

par 14 The provisions that apply for the purposes of allowing for credit for foreign tax against USC on foreign income are also applicable for the purposes of income levy.

Relevant Date: Finance Act 2021