Dáil Éireann Debate, Tuesday - 3 November 2020
414. Deputy Ged Nash asked the Minister for Finance his views on reports that a company (details supplied) has paid €700 million in tax-free dividends to its parent company in the three years since the acquisition and did not have to pay corporation tax in 2019 despite revenue of €178.7 million and an operating profit of €74.5 million; if he will bring forward plans to address this matter; and if he will make a statement on the matter. [32655/20]
View answerThe Deputy has raised two points which I will deal with in turn, but I must first set out the parameters which must be respected when doing so. The Deputy will be aware that Revenue is statutorily bound to confidentiality in respect of taxpayer information and by law Revenue is prohibited from disclosing taxpayer information to third parties, including to Dáil Éireann. Section 851A of the Taxes Consolidation Act 1997 (or "TCA 1997") formalises taxpayer confidentiality and reassures taxpayers that their personal and commercial information disclosed to Revenue for tax purposes is protected against unauthorised disclosure by Revenue to third parties. Revenue is also obliged by section 851A TCA 1997 to ensure that information about individual taxpayers or a small group of taxpayers cannot be deduced from any statistical reports or similar information published by Revenue.
The Deputy’s first query concerned the payment of dividends from an Irish tax resident company to a non-resident shareholder without deduction of Irish tax. I am advised by Revenue that the general rule concerning dividend withholding tax or “DWT” is contained in section 172B TCA 1997. This provides that DWT at a rate of income tax of 25% applies to all ‘relevant distributions’ made by Irish resident companies, including payments of cash dividends. The DWT must be deducted at the time the distribution is being made and paid to Revenue by the 14th of the following month, unless the company has satisfied itself that the recipient is entitled to receive the distribution without the deduction of DWT. For example, section 172D(3) TCA 1997 provides an exemption from DWT in the case of certain non-resident persons which are resident for tax purposes in another EU Member State or a country with which Ireland has a double taxation treaty. Therefore, where an Irish tax resident company pays a dividend to a non-resident shareholder meeting the criteria set out in section 172D(3) TCA 1997, DWT does not have to be deducted from the dividend payment by the Irish tax resident company.
In relation to the Deputy’s second query, I would like to draw the Deputy’s attention to the overall framework for the taxation of income from a trade consisting of petroleum activities, a trade which is the focus of the Deputy’s question. The taxation of activities in the oil and gas sector is a specialised area and I am advised that Chapter 2 of Part 24 TCA 1997 contains a number of specific provisions which deal with the taxation of petroleum activities. Petroleum activities includes both petroleum exploration activities and petroleum extraction activities. For this purpose, petroleum has the same meaning as in section 2(1) of the Petroleum and Other Minerals Development Act 1960 and includes “any mineral oil or relative hydrocarbon and natural gas and other liquid or gaseous hydrocarbons and their derivatives”.
Companies involved in petroleum extraction activities incur significant costs in the context of both petroleum exploration activities and petroleum extraction activities and significant capital expenditure on production and development in connection with an oil or gas field. I understand that on the commencement of a trade of petroleum extraction by a company, all of its past petroleum exploration expenditure is deductible against the income from its petroleum activity. In addition, a 100% write down allowance is available for capital expenditure incurred on plant and machinery, assets or other works, buildings or structures, used in the carrying on of a petroleum extraction activity. This write down allowance is available from the date of production or development commenced in commercial quantities for the field in question. I am advised that any unutilised allowances on petroleum exploration expenditure and capital expenditure on production or development of an oil or gas field can be carried forward to shelter income in future trading periods.
Income from a trade consisting of petroleum activities is subject to corporation tax at the rate of 25%. Furthermore, it is important to note, that petroleum activities are ring-fenced from other trading activities to prevent erosion of the tax base which would result from non-petroleum profits being sheltered by deductions in respect of the substantial costs attributable to petroleum development.
I wish to emphasise that the information outlined above is provided so as to be helpful to the Deputy and in the context of Revenue’s specific confidentiality obligations. It relates to the general taxation rules applying to the payment of dividends from an Irish tax resident company to a non-resident shareholder and a trade consisting of petroleum activities. It does not relate to any specific entity or group of entities.
