I move amendment No. 117:
In page 154, before section 57, to insert the following new section:
"58.—Schedule 24 to the Principal Act is amended—
(a) in paragraph 4 by inserting the following after subparagraph (2):
"(2A) For the purposes of subparagraph (2) but subject to subparagraph (3), where credit is to be allowed against corporation tax for foreign tax in respect of any income of a company (in this subparagraph referred to as ‘that income'), being income which is taken into account in computing the profits or gains of a trade carried on by the company in an accounting period, the relevant income shall be so much of the profits or gains of the trade for that accounting period as is determined by the formula—
P x I
P is the amount of the profits or gains of the trade for the accounting period,
I is the amount of that income for the accounting period before deducting any disbursements or expenses of the trade, and
R is the total amount receivable by the company in the carrying on of the trade in the accounting period.",
(b) by inserting the following after paragraph 9E:
"9F(1)(a) In this paragraph—
the "aggregate amount of corporation tax payable by a company for an accounting period in respect of relevant interest of the company for the accounting period from foreign companies" means so much of the corporation tax which, apart from this paragraph, would be payable by the company for that accounting period as would not have been payable had the interest not been chargeable to tax;
"foreign company" means a company resident outside the State;
"relevant foreign tax", in relation to interest receivable by a company, means tax which—
(i) under the laws of any foreign territory has been deducted from the amount of the interest,
(ii) corresponds to income or corporation tax,
(iii) has not been repaid to the company; "unrelieved foreign tax" has the meaning assigned to it in subparagraph (2).
(b) For the purposes of this paragraph—
(i) interest which is receivable by a company (in this clause referred to as the "receiving company") from a company is relevant interest if—
(I) the interest falls to be taken into account in computing the trading income of a trade carried on by the receiving company,
(II) the interest arises from a source within a territory in regard to which arrangements have the force of law, and
(III) one of those companies is the 25 per cent subsidiary of the other or both companies are 25 per cent subsidiaries of a third company;
(ii) subject to subclause (iii), a company shall be deemed to be a 25 per cent subsidiary of another company if and so long as not less than 25 per cent of its ordinary share capital would be treated as owned directly or indirectly by that other company if section 9 (other than subsection (1) of that section) were to apply for the purposes of this paragraph;
(iii) a company (in this subclause referred to as a "subsidiary company") shall not be deemed to be a 25 per cent subsidiary of another company (in this subclause referred to as the "parent company") at any time if the percentage—
(I) of any profits, which are available for distribution to equity holders, of the subsidiary company at such time to which the parent company is beneficially entitled at such time, or
(II) of any assets, which are available for distribution to equity holders on a winding up, of the subsidiary company at such time to which the parent company would be beneficially entitled at such time on a winding up of the subsidiary company, is less than 25 per cent of such profits or assets (as the case may be) of the subsidiary company at such time, and sections 413, 414, 415 and 418 shall, with any necessary modifications but without regards to section 411(1)(c) in so far as it relates to those sections, apply to the determination of the percentage of those profits or assets (as the case may be) to which a company is beneficially entitled as they apply to the determination for the purposes of Chapter 5 of Part 12 of the percentage of any such profits or assets to which a company is so entitled.
(2) Where, as respects any relevant interest received in an accounting period by a company, any part of the foreign tax cannot, apart from this paragraph, be allowed as a credit against corporation tax and, accordingly, the amount of income representing the interest is treated under paragraph 7(3)(c) as reduced by that part of the foreign tax, then an amount determined by the formula—
100-R x D
R is the rate per cent specified in section 21(1), and
D is the amount of the part of the foreign tax by which the income is to be treated under paragraph 7(3)(c) as reduced,
shall be treated for the purposes of subparagraph (3) as unrelieved foreign tax of that accounting period.
(3) The aggregate amount of corporation tax payable by a company for an accounting period in respect of relevant interest of the company in that accounting period shall be reduced by the unrelieved foreign tax of that accounting period.".".
Report Stage amendments may be brought forward for sections 57, 58 and 61 and with regard to securitisation. These will essentially be technical amendments. There will also be an amendment on life insurance definitions in section 69.
Amendment No. 117 inserts a new section in the Bill. The new section makes a number of changes to Schedule 24 of the Taxes Consolidation Act 1997. The first change clarifies the rules to calculate the amount of doubly taxed income. Where income of a company that is subject to Irish corporation tax has suffered foreign tax, double taxation relief is given by reducing the Irish tax on the doubly taxed income by the foreign tax on that income. If the Irish tax and the doubly taxed income is less than the foreign tax, then the credit is limited to the amount of that Irish tax. It is important to determine for this purpose what is the Irish tax on the doubly taxed income. It is calculated by applying the corporation tax rate to the doubly taxed income. The manner of calculating such income can be an issue in the case of interest received by a company. The question is whether the doubly taxed income is the gross amount received or the amount received net of expenses. The correct approach is now being clarified. The new section provides that doubly taxed income is a proportion of net taxable income of the company, based on the ratio of the interest received to the total receipts of the accounting period concerned.
The second change is concerned with the pooling of foreign tax credits on interest in the case of a company that carries on a financial trade. The change applies to interest which is sourced in a country with which Ireland has a tax treaty and which has been received by the company from its associated companies. Under the amendment, relief will be allowed for the foreign tax on doubly taxed interest that cannot be relieved against Irish tax on that income because of the restriction of the credit to Irish tax on the doubly taxed income. Under the revised rules, the surplus foreign tax will be credited against tax on other interests from associated companies that are sourced in the tax treaty country. I hope people can make sense of that. I commend the amendment to the committee.