25 Companies not resident in the State

Summary

This section lays down the scope of the charge to corporation tax in the case of non-resident companies. A non-resident company is not within the charge to corporation tax unless it carries on a trade in the State through a branch or agency or is in receipt of rental income or gains from Irish property. Where a non-resident company so carries on a trade, the company is chargeable not only on trading income arising directly or indirectly through or from the branch or agency but also on any other income arising from property or rights used by or held by or for the branch or agency and on any chargeable gains attributable to the branch or agency. Income tax deducted from income forming part of a non-resident company’s income chargeable to corporation tax is to be set off against any corporation tax liability on that income. Accordingly, the income tax so deducted is not repayable until the corporation tax liability for the accounting period concerned has been determined.

A non-resident company which does not carry on a trade in the State through a branch or agency, or is not in receipt of rental income or gains from Irish property, is chargeable to income tax in respect of income arising from other sources within the State. Where a non-resident company has a branch or agency within the State, it is to be charged to income tax and not to corporation tax on income which is neither attributable to the branch or agency nor rental income or gains from Irish property. Similarly, capital gains tax is levied on the chargeable gains of a non-resident company where it has no branch or agency in the State or where, if it has a branch or agency in the State, the gains are not attributable to the branch or agency. However, where a non-resident company is chargeable to corporation tax on income from Irish properties under Case V, any chargeable gains attributable to those properties will be chargeable to corporation tax.

Details

Certain non-resident companies within the charge to corporation tax

(1) Subject to subsection 2A, a non-resident company is not within the charge to corporation tax unless it carries on a trade in the State through a branch or agency. Where it does so, the company is chargeable to corporation tax on all its chargeable profits wherever arising, subject to any express exceptions provided for in the Corporation Tax Acts. Examples of the “exceptions provided for” include sections 726(2) and 727(1) which require that distributions by resident companies to a non-resident life assurance company are to be taken into account in computing the liability of the latter company to corporation tax.

Chargeable profits

(2) The chargeable profits of a non-resident company carrying on a trade in the State through a branch or agency are —

• any trading income arising directly or indirectly through or from the branch or agency,
• any income from property or rights used by, or held by or for, the branch or agency (for example, patent royalties received by the branch), and
• chargeable gains attributable to the branch or agency.

In the case of chargeable gains, the mechanism used to bring those gains within the charge to corporation tax is to bring into charge all chargeable gains accruing to a non-resident company which apart from the Corporation Tax Acts would be chargeable to capital gains tax and to exclude gains on the disposals of assets which were not used in or for the purposes of the trade of the branch or agency and which were not used, held or acquired for the purposes of the branch or agency.

Distributions received by such a non-resident company from resident companies are excluded as distributions and are not within the charge to corporation tax by virtue of section 129. Subsection (1) provides for exceptions to this rule and the note on that subsection gives examples of when distributions from resident companies may be taken into account in computing the corporation tax liability of a non-resident company carrying on a trade through a branch or agency.

(2A) A non-Irish resident company that is within the charge to tax on profits or gains under Case V of Schedule D will be chargeable to corporation tax on those profits or gains. A gain or loss on the disposal of an asset by a non-resident company, the profits or gains from which were chargeable to tax under Case V of schedule D, or would have been chargeable to tax but for an insufficiency of profits or gains, is within the charge to corporation tax. The exception to this rule is where a gain is realised on the disposal of development land in which case the gain or loss is within the charge to capital gains tax. This subsection applies to profits or gains accruing on or after 1 January 2022.

Set off of tax deducted

(3) Subject to section 729 (which makes special provisions for overseas life assurance companies), where a non-resident company receives a payment under deduction of income tax and the payment forms part of its income for the purposes of corporation tax, the income tax deducted from the payment is to be set off against the company’s corporation tax liability for the accounting period in which the payment falls. Accordingly, although by virtue of section 21(2)(b) the payment is not chargeable to income tax, the company, unless wholly exempt from corporation tax, is not entitled to claim repayment of the income tax until the corporation tax liability for the particular accounting period has been determined.

Relevant Date: Finance Act 2021