Revenue Note for Guidance

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Revenue Note for Guidance

Corporation tax: treatment of tax-free income of non-resident banks, insurance businesses, etc

Summary

This section brings into charge to corporation tax foreign interest and dividends arising to a non-resident bank, insurance company or other person carrying on a business of dealing in stocks, shares or securities in the State through a branch or agency where the foreign securities are attributable to the branch or agency. In the absence of such a provision income exempt from income tax in the hands of non-residents under section 35 or 63 (exemption from income tax of certain dividends payable to non-residents) would be exempt from corporation tax because of section 76 which exempts from corporation tax any income which is exempt from income tax. The section also provides for a restriction of expenses in computing profits or losses, or management expenses, where interest on certain Government, etc securities is excluded in computing income or profits for corporation tax purposes and the expenses are attributable to those securities.

Details

(1) It is made clear that “insurance business” is to include assurance business within the meaning of section 3 of the Insurance Act, 1936.

(2) The term “tax-free securities” for the purposes of this section and section 846 means securities to which section 43, 49 or 50 apply and which were issued with a condition that the interest will not attract liability to tax in the hands of non-resident holders of the securities.

(3) Interest and income from foreign securities stocks and shares attributable to the Irish branch of a non-resident bank, insurance company or company dealing in investments are to be included in computing for corporation tax purposes the profits or losses of the Irish branch business and, in the case of an insurance company, in computing the profits or losses arising from its pension and general annuity businesses under section 715.

(4) Expenses (but not interest) referable to “tax-free securities” are not to be allowed in computing for corporation tax purposes the branch profits of non-resident banks, insurance companies or companies dealing in securities where the interest on such securities is excluded from the profits. The subsection also provides that profits and losses on the realisation of such securities are not to be taken into account for corporation tax purposes.

(5) In computing under section 726 the proportion of the investment income of the life assurance fund of a non-resident insurance company to be charged to corporation tax, foreign interest and dividends to which sections 35 and 63 apply are to be taken into account.

Relevant Date: Finance Act 2018