50 Securities of Irish local authorities issued abroad

Summary

Income from securities issued, under the authority of the Minister for Finance, outside the state by a local authority for the purpose of raising money is exempt from tax, except where such securities are held by persons domiciled or ordinarily resident in the State or, if issued after 15 May, 1992, where such securities are held by or for a branch or agency through which a foreign company carries on a financial trade in the State.

Details

(1) A “local authority” includes any public body recognised as a local authority for the purposes of this section by the Minister for the Environment and Local Government.

(2) Securities issued outside the State by a local authority in the State for the purpose of raising money which it is authorised to borrow are exempt from tax if issued under the authority of the Minister for Finance. However, this exemption does not apply where such securities —

• are held by persons domiciled in the State or ordinarily resident in the State, or
• were acquired by a company after 15 May, 1992 (regardless of when they were issued) and are held by or for a branch or agency of the company through which it carries on a financial trade in the State.

In general, acquisition of securities is to be interpreted as the beneficial acquisition of the securities so that the nominal reacquisition of securities which, before and after that nominal reacquisition, were beneficially owned by a branch are to be ignored.

The requirement that the trade or business be a “financial” trade or business in order for the exemption not to apply is achieved by reference to the basis on which the income from the securities would be charged to tax if no exemption applied – that is, would the income (which as well as interest on the security includes profits on disposal or redemption of the security) from the security be charged to tax as the income from a financial trade or business if the exemption did not apply. The reference to the Schedule D Case I and Case IV charges ensures that the provision applies to banking and general insurance businesses. (In so far as the reference to the Case IV charge is concerned, it is to be noted that the withdrawal of the exemption applies only to interest and other profits accruing on or after 21 April, 1997.) The reference to the section 726 charge ensures that the provision applies to life assurance businesses.

Relevant Date: Finance Act 2021