746 Offshore income gains accruing to persons resident or domiciled abroad

Summary

This section applies, with suitable adaptations, certain provisions of the capital gains tax code for the purposes of charging gains on disposals of interests in offshore funds where the disposals are made outside the State for the benefit of individuals resident in the State. Under the capital gains tax code, capital gains realised by non-resident settlements may be attributed to Irish beneficiaries. Similarly, capital gains realised by a non-resident company can be attributed to Irish participators. This section ensures that offshore income gains realised by non-resident settlements or companies are, in similar circumstances, attributed to Irish resident beneficiaries and participators respectively. In the case of offshore income gains realised by a non-resident company and attributed to a participator, the amount of tax charged is treated as allowable expenditure in computing the gain or loss on any subsequent disposal by the participator of his or her interest in the non-resident company. The section also clarifies the interaction of the offshore fund provisions with the provisions which deal with income derived by Irish residents from assets transferred abroad.

Details

(1) The provisions of sections 579 and 579A (capital gains of non-resident trusts) are adapted for the purposes of offshore income gains. References in those sections to chargeable gains are to be construed as a reference to offshore income gains and references to capital gains tax is to be construed as a reference to income tax or corporation tax. Thus, a proportionate part of an offshore income gain accruing to a non-resident trust can be attributed to an Irish resident and domiciled beneficiary.

(2), (2A) Where a beneficiary receives a discretionary capital payment from a non-resident trust after the gain arose, an offshore income gain is attributed to the payment in priority to a chargeable gain.

(3) Where a non-resident company would be treated as a close company if it were resident in the State, any offshore income gains which it realises are chargeable in the hands of Irish resident participators in proportion to their interest as participators. This is done by applying the provisions of section 590 with appropriate adaptations. In applying section 590, subsections (7)(a) and (7)(b) (which exempt gains on disposals of trade assets) and subsection (11) (which allows losses to be set off against gains) of that section are omitted.

(4) The power of the Revenue Commissioners to obtain information from participators of non-resident companies and beneficiaries of non-resident trusts in relation to chargeable gains are adapted for the purposes of obtaining information in relation to offshore income gains.

(5) Offshore income gains which would be outside the charge imposed by this section (for example, because the person realising the gain is not a trustee) may be chargeable under sections 806–807C – anti-avoidance legislation relating to the transfer of assets abroad. These provisions are to apply to offshore income gains as if the gains constituted income of the recipient. An Irish resident individual may, therefore, be chargeable on offshore income gains realised by and retained by a person resident or domiciled abroad. However, these provisions apply only where the individual concerned has power to enjoy the offshore income gains realised by the person resident or domiciled abroad.

(6) Where an Irish resident is charged to tax under the offshore fund provisions, either because a company in which he/she is a participator realises an offshore income gain or because a trust of which he/she is a beneficiary receives an offshore income gain, then a further charge to tax cannot arise under sections 806–807C or Part 31.

Relevant Date: Finance Act 2021