222 Certain dividends from a non-resident subsidiary

Summary

The section exempts from corporation tax certain dividends received by an Irish resident company from a non-resident subsidiary. The exemption only applies where the proceeds of such dividends are applied for the purposes of an “approved investment plan” which is directed towards the creation and maintenance of employment in the State.

To claim the relief, a company must submit an “investment plan” to the Minister for Finance showing how it proposes to apply the proceeds of a specified amount of dividends received from a foreign subsidiary. Where the Minister is satisfied that the plan is directed towards the creation or maintenance of employment in trading activities which is or will be carried on in the State, he/she may issue a certificate indicating a specified amount of the dividends which qualify for exemption. Such a certificate must be given before 15 February 2001. The qualifying dividends must be applied for the purposes of an approved investment plan within a specified 3 year time period. The amount qualifying for exemption can be reduced where the full amount of the dividends are not spent on the approved investment plan.

No particular category of investment or employment is specified. An investment in any type of trading activities may qualify provided the activities are carried on in the State. The investment may be made by the company in activities it directly carries on or may be made indirectly by, for example, subscription for shares in another company which would then make the investment.

The nature of the employment is not specified beyond that it must be in Ireland. The employment may be either new jobs in a new or expanding business or existing jobs is a business which, but for the investment, would probably close down or shed jobs. There is no specification as to the number involved.

Details

Definitions

(1) “approved investment plan” is an investment plan in respect of which the Minister for Finance has given a certificate in accordance with subsection (2).

“investment plan” is a plan of a company resident in the State directed towards the creation or maintenance of employment in the State in trading operations carried on or to be carried on in the State. The plan may be submitted in advance of implementation or after implementation where the Minister for Finance is satisfied that there was reasonable cause for the delay in submitting the plan. The plan must, in any case, be submitted within one year of its implementation.

“relevant dividends” are dividends received by an Irish resident company from a foreign subsidiary of that company which may qualify for relief under the section. They must be dividends —

• specified in a certificate given by the Minister before 15 February, 2001, and
• applied for the purposes of an approved investment plan in a period beginning one year before and ending 2 years after the dividends are received in the State.

The Revenue Commissioners have the power to specify an extension of this period either backwards or forwards or both backwards and forwards.

“a foreign subsidiary” is a company resident in a country with which Ireland has a double taxation treaty, which is a 51 per cent subsidiary of the claimant company.

Certification

(2) Where an investment plan has been submitted to the Minister by a claimant company, the Minister may give a certificate specifying the amount of dividends which may qualify for relief under the section. Before issuing such a certificate the Minister must be satisfied that the proceeds of the dividends will be applied towards the creation or maintenance of employment in trading activities carried on, or to be carried on, in the State.

Exemption

(3) Subject to subsection (4), where a company claims and proves that it has received in an accounting period an amount of relevant dividends, its income for the purposes of corporation tax will not include any amount in respect of those dividends.

(4) Where all or part of the dividends specified in a certificate have not been applied within the required period for the purposes of the related “approved investment plan”, the Minister may, by notice in writing, reduce the amount of dividends specified in the certificate. Where relief has been granted in respect of the relevant dividends specified in the certificate before the reduction, the inspector may make such assessments as are necessary to recover the relief given in respect of the amount of the reduction. Where relief has not yet been claimed, relief will only be granted in respect of the amount as so reduced.

Claims

(5) A claim for relief under this section must be made in writing to the inspector together with the company’s tax return for the accounting period in which the relevant dividends are received in the State.

Relevant Date: Finance Act 2021