Revenue Note for Guidance

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Revenue Note for Guidance

239 Income tax on payments by resident companies

Summary

This section regulates the time and manner in which Irish resident companies are to account for and pay income tax in respect of payments from which income tax is deductible. The income tax which is to be paid over under this section is treated as if it were corporation tax (that is, as part of the company’s corporation tax liability). Accordingly, in paying preliminary tax under Chapter 7 of Part 41A, the company must take into account its liability under this section.

Details

Definition

(1) A “relevant payment” is a payment from which income tax is deductible and to which the provisions of section 238(3) to (5) apply, or a payment which is treated under section 438 (loans to participators, etc) as an annual payment and in respect of which the company must account for income tax at the standard rate.

The provisions of section 238(3) to (5) apply to —

  • annual payments,
  • patent royalties,
  • by virtue of section 246, certain payments of interest,
  • by virtue of section 683(3), capital sums received on the sale of scheduled mineral assets, and
  • by virtue of section 757(2), capital sums received on sale of patent rights.

Application

(2) The purpose of the section is to regulate the time and manner in which Irish resident companies account for and pay (or are to be repaid) income tax on relevant payments.

Returns and payment

(3) – (4A) For each accounting period a company must make a return to the inspector of its relevant payments and of the income tax for which it is accountable in respect of those payments. This return must be made within 9 months from the end of the accounting period to which it relates but in any event not later than day 21 [day 23 in the case of a company filing its return electronically – subsection (4A)] of the month in which that period of 9 months ends.

(5) The tax is due at the time by which corporation tax for the accounting period for which the return is required to be made under subsection (3) is due and payable and income tax so due shall be payable by the company in accordance with section 958 – this brings the due dates for payment of income tax on relevant payments into line with those applying for corporation tax – and is payable without the making of an assessment. However, an assessment may be made where necessary whether or not tax has been paid.

(6) The inspector may make estimated assessments where a relevant payment is not included in a return or where the inspector is dissatisfied with a return. For the purposes of interest on unpaid tax, the tax on such assessment is treated as payable at the time it would have been payable if a correct return had been made.

Relief by way of set-off

(7) & (8) A company may offset the income tax deducted from relevant payments it receives in an accounting period against the income tax it is liable to pay on the relevant payments it makes in that period. The claim for any such set-off is to be included in the return made under subsection (3) and, where necessary, tax will be repaid. No legal proceedings for collecting income tax due under this section may be started in respect of tax which is subject to a claim for set-off. However, a claim for set-off cannot halt proceedings already begun.

(9) Income tax set-off under subsection (7) is treated as paid. A double set-off is prevented by providing that the same tax is not to be taken into account both under this section and section 24(2) (under which income tax deducted from annual payments, etc can be set against corporation tax).

Payments made which are not in an accounting period

(10) In the unusual situation where a company makes a relevant payment under deduction of tax at a time which is not in an accounting period, the previous provisions of this section apply with the following modifications —

  • the income tax must be paid at the same time,
  • an income tax assessment may be made for the year of assessment in which the payment was made for the purposes of recovering the tax deducted.

Section 240 provides collection procedures for tax assessed under this subsection.

Treatment of income tax as corporation tax

(11)(a) Income tax payable (after setting off in accordance with subsection (7) income tax suffered by the company) in respect of tax deducted from relevant payments is to be treated as corporation tax payable for the accounting period in which the payments are made. This provision applies for the purposes of the charge, assessment, collection and recovery of the tax and interest and penalties on that tax.

(11)(b) The company is not prevented from obtaining a repayment of the tax paid because of its treatment as corporation tax.

(11)(c) Only one assessment need be made under the various provisions of this section for all relevant payments in respect of which the tax is due on the same date. These provisions, however, do not apply to an assessment made under subsection (10) in respect of a relevant payment made at a time which is not in a company’s accounting period.

Saver for other collection methods

(12) Despite the collection procedures provided for by this section, the normal collection powers in the Tax Acts are preserved for use where necessary.

Regulations

(13) The Revenue Commissioners are authorised to make regulations modifying the provisions of this section. Every such regulation made is to be laid before Dáil Éireann. No such regulations have been made to date.

Example

A company makes up its accounts annually to December 31.

Accounts for the year ended 31.12.2002 show the following payments —

Gross

Tax deducted

Net

Royalties

€10,000

€2,000

€8,000

Mining rents

€20,000

€4,000

€16,000

Total tax deducted

€6,000

The company received an annual payment of €1,000 gross from which tax of €200 had been deducted.

The company must remit to the Collector-General as part of its preliminary tax —

Tax deducted

€6,000

Less tax suffered

€200

Net amount to be remitted

€5,800

Relevant Date: Finance Act 2017