I move amendment 30c:
In page 92, between lines 46 and 47 to insert a new subsection as follows :
" (4) subsection (1) shall not apply to—
(a) loans made to persons who are not resident in the State and where no person resident in the State would become liable to tax if distributions were made to the non-resident person who received the loan;
(b) loans in excess of a company's distributable income;
(c) loans made out of profits which have been relieved from tax under Parts IV and V of this Act or under Part XXV of the Income Tax Act, 1967".
The proposal under the Bill is that where a closed company gives a loan to a shareholder, tax at the rate of 35/65ths of the loan granted, while the standard rate of tax is 35 per cent must be paid to the Revenue Commissioners. There is provision that when the loan is repaid to the company the tax will be refunded by the Revenue Commissioners. In principle there does not seem to be justification for imposing such a charge on a close company where no additional taxation would arise if the recipient of the loan received a distribution in the form of a dividend. Examples of such circumstances could be: (1) loans to non-residents who, under tax treaties, are not liable to income tax in Ireland in respect of dividends at rates in excess of the tax credit available; (2) loans in excess of a company's income, that is where the source of the cash was from the realisation of assets which had not been reinvested or paid out as a reduction of share capital; (3) loans made out of tax holiday profits.
In regard to companies with tax holiday profits, only some of our double taxation agreements provide for a measure of relief for foreign share holders in respect of tax relief on dividends received by them from Irish companies which have qualified for relief under the tax exemption scheme. It is not in the interests of this State to put pressure on this type of investor at this time, where payment of a dividend would not benefit this country. In this connection, the United Kingdom Revenue did not apply their shortfall provisions on close companies where 90 per cent or more of the ordinary share capital that was owned by non-residents.
It is clear what I am looking for here. I want to exempt loans which are made to persons who are not resident in the State and where no person resident in the State would have become liable to tax on the redistribution made to the non-resident person who received the loan and loans which are in excess of a company's distributive income and loans made out of office which have been relieved of tax under Parts IV and V and under Part XXV of the Income Tax Act, 1967.
