Revenue Note for Guidance

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Revenue Note for Guidance

72 Charge to tax on sums applied outside the State in repaying certain loans


This is an anti-avoidance provision directed against the use of a device whereby a person with foreign income assessable on the remittance basis under section 71 could avoid tax on such income by obtaining an overdraft or other loan which could be enjoyed in the State and then paying off the overdraft or loan out of the foreign income. The section treats the amount used to pay off the loan abroad as income remitted to the State and, accordingly, subject to Irish tax.


(1)(a) Attempts to circumvent the application of the section by use of a series of loans is prevented.

(1)(b) A “lender” is any person entitled to repayment of any money loaned.

(2) For the purpose of computing income under the remittance basis as provided for in section 71(3) in the case of persons ordinarily resident in the State (for the remittance basis to apply to such persons they would have to be not domiciled in the State), such income as is applied abroad by such a person in or towards the settlement of —

  • a loan made in the State or interest on such a loan,
  • a loan made abroad and received in or brought to the State, or
  • a debt incurred in satisfying in whole or in part any such loan,

is treated as receivable in the State as a remittance.

(3) Where a loan has been paid off abroad out of foreign income before the proceeds of the loan are brought to the State, the foreign income out of which the loan is settled is treated as a remittance received in the State when the proceeds of the loan are brought to the State, and subsection (2) applies accordingly.

(4) In certain circumstance a borrower may not literally repay his/her loan, but may deposit income or assets representing income with the lender in such circumstances that the lender is content to leave his/her loan outstanding or even add to it. For example, a borrower may use his/her foreign income to buy securities and may then deposit those securities with the foreign lender, creating a charge in favour of the lender. Any income so applied is treated as being applied towards settlement of the loan if there is an arrangement between lender and borrower that the amount for the time being of the loan, or the time when it is to be repaid, depends directly or indirectly on the amount held by the lender on behalf of or to the account of the borrower.

(5) The section is extended to persons resident in the State who are subject to the remittance basis provided for in section 71(3) (such persons would have to be not domiciled in the State). This extension, however, has effect only in relation to income applied to pay off a loan taken out on or after 20 February, 1997.

Relevant Date: Finance Act 2021