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13 1991

FINANCE ACT, 1991

Chapter IV

Corporation Tax

Amendment of section 84A (limitation on meaning of “distribution”) of Corporation Tax Act, 1976.

28. Section 84A (as amended by the Finance Act, 1990 ) of the Corporation Tax Act, 1976 , is hereby amended—

(a) by the insertion, after subsection (3A), of the following subsection:

“(3B) (a) Notwithstanding subsections (2), (3) and (3A), where at any time on or after the 31st day of December, 1991, the current amounts of relevant principal advanced by a company in respect of relevant securities held, directly or indirectly, by the company at that time is in excess of a limit, being a limit equal to 40 per cent of the total of the amounts of relevant principal advanced by the company in respect of relevant securities held, directly or indirectly, by the company on the 12th day of April, 1989, then any interest paid to the company in respect of relevant principal advanced by the company on or after the 31st day of December, 1991, which relevant principal is included in the current amounts of relevant principal, shall not be treated as a distribution for the purposes of this Act in the hands of the company:

Provided that—

(i) where the total of the amounts of relevant principal advanced by a company in respect of relevant securities held, directly or indirectly, by the company at any time on or after the 31st day of December, 1991, is less than the said limit, this paragraph shall have effect as if the said limit were the total of the amounts of relevant principal so advanced as at that time unless the company proves that it has, as far as possible, at all times on or after the 31st day of December, 1991, advanced to borrowers relevant principal in respect of the interest on which the provisions of paragraph (a) do not, or would not, apply by virtue of the provisions of paragraph (b), and

(ii) where at any time during the period commencing on the 18th day of April, 1991, and ending immediately before the 31st day of December, 1991, an amount of relevant principal which was advanced to a borrower, being a company which carries on one or more trading operations (within the meaning of subsection (1) of section 39A, as amended by the Finance Act, 1991, of the Finance Act, 1980 ) is repaid, this section shall have effect as if—

(I) references in paragraph (a) of this subsection, other than this paragraph of the proviso, to the 31st day of December, 1991, were references to the day on which the amount is repaid, and

(II) during that period—

(A) the reference in paragraph (i) of this proviso to relevant principal in respect of the interest on which the provisions of paragraph (a) do not, or would not, apply by virtue of the provisions of paragraph (b) were a reference to such principal in respect of the interest on which the provisions of paragraph (a) of subsection (3A) do not, or would not, apply by virtue of the provisions of paragraph (b) of that subsection, and

(B) the reference in paragraph (b) of subsection (3A) to paragraph (a) of that subsection were a reference to paragraph (a) of this subsection.

(b) Where, apart from this paragraph, any part of any interest paid to a company in respect of relevant principal advanced by the company on or after the 31st day of December, 1991, would not be treated as a distribution for the purposes of this Act in the hands of the company by virtue only of the provisions of paragraph (a), then the provisions of that paragraph shall not apply in relation to so much of that interest as is paid if—

(i) the specified trade is a trade which the borrower commenced to carry on after the 31st day of January, 1990, or is a specified trade of the borrower in respect of which he is committed, under a business plan approved by the Industrial Development Authority, the Shannon Free Airport Development Company Limited or Údarás na Gaeltachta, to the creation of additional employment,

(ii) the specified trade of the borrower is selected by the Industrial Development Authority for inclusion in a list, approved by the Minister for Industry and Commerce and the Minister for Finance, which list specifies a particular amount of relevant principal in respect of each trade which amount is considered to be essential for the success of that trade, and

(iii) the borrower, or a company connected (within the meaning of section 157 (5)) with the borrower, is not a company which commenced to carry on relevant trading operations (within the meaning of section 39B of the Finance Act, 1980 ) after the 20th day of April, 1990, or intends to commence to carry on such trading operations:

Provided that this paragraph shall not apply to any interest in respect of any relevant principal advanced after the time the total of the amounts of relevant principal to which this paragraph applies, advanced by all lenders who have made such advances, exceeds the aggregate of—

(a) £250,000,000, and

(b) the excess, if any, of the amount specified in the proviso to paragraph (b) of subsection (3A) over the total of the amounts of relevant principal to which that paragraph applies advanced by all lenders who have made such advances.”,

(b) by the insertion, after subsection (4), of the following subsection:

“(4A) (a) Interest paid to a company in respect of—

(i) relevant principal, denominated in a currency other than Irish currency, and

(ii) a relevant period which begins on or after the 30th day of January, 1991,

shall not be a distribution for the purposes of this Act in the hands of the company if at any time during the said period the rate on the basis of which that interest is computed exceeds 80 per cent, of the rate known as the three month Dublin Interbank Offered Rate on Irish pounds (hereafter in this subsection referred to as the ‘three month Dublin Interbank Offered Rate’) a record of which is maintained by the Central Bank of Ireland.

(b) Paragraph (a) shall not apply to any interest which is paid to a company in respect of relevant principal advanced by the company—

(i) before the 30th day of January, 1991, under an agreement entered into before that day if, on that day, the rate on the basis of which interest in respect of the relevant security falls to be computed exceeds 80 per cent of the three month Dublin Interbank Offered Rate,

(ii) on or after the 30th day of January, 1991, for the purposes of a specified trade—

(I) which is included in a list referred to in subparagraph (iv) of paragraph (b) of subsection (3A) or subparagraph (ii) of paragraph (b) of subsection (3B), and

(II) of a borrower who is certified by the Minister for Industry and Commerce as having received an undertaking that the said interest would be treated as a distribution,

(iii) on or after the 18th day of April, 1991, where the rate on the basis of which that interest is computed exceeds 80 per cent of the three month Dublin Interbank Offered Rate by reason only that the relevant principal advanced is denominated in sterling, or

(iv) to a borrower which is a company carrying on one or more trading operations (within the meaning of subsection (1) of section 39A, as amended by the Finance Act, 1991, of the Finance Act, 1980 ).

(c) In paragraph (a) ‘relevant period’ means a period which commences at a time at which, in accordance with the terms of the agreement under which the relevant principal secured by the said relevant security is advanced, an amount representing the interest for the use of the said relevant principal falls to be paid, and ending at a time immediately before the next time at which such an amount falls to be paid.”,

(c) in subsection (3A)—

(i) by the substitution, in paragraph (a), of “in this subsection and in subsection (3B)” for “in this subsection”,

(ii) by the substitution, in paragraph (c), of “this subsection and subsection (3B)” for “this subsection” and of “a day” for “the 31st day of January, 1990,”, and

(iii) by the substitution, in paragraph (d), of “this subsection and subsection (3B)” for “this subsection”,

(d) in subsection (5), by the substitution of “In subsections (2), (3), (3A), (3B), (4) and (4A)” for “In subsections (2), (3), (3A), and (4)”, and

(e) in subsection (6), by the substitution of “in subsections (2), (3A), (3B), (4) and (4A)” for “in subsections (2) and (3A)”.

Amendment of section 87 (distributions: supplemental) of Corporation Tax Act, 1976.

29. Section 87 of the Corporation Tax Act, 1976 , is hereby amended, as respects any acquisition of shares on or after the 25th day of July, 1990, in subsection (4) by the addition of the following paragraph after paragraph (d):

“(e) Nothing in this subsection shall require a company, which is a subsidiary (being a subsidiary within the meaning of section 155 of the Companies Act, 1963 ) of another company to be treated as making a distribution where it acquires shares in the other company pursuant to section 9 (1) of the Insurance Act, 1990 .”.

Amendment of section 35 (profits of life business) of Corporation Tax Act, 1976.

30. —(1) Section 35 of the Corporation Tax Act, 1976 , is hereby amended as respects any accounting period ending on or after the 31st day of December, 1990:

(a) by the addition after subsection (1) of the following subsection:

“(1A) Where a company's trading operations consist solely of a foreign life assurance business as defined in paragraph (a) of subsection (4) of section 36 of the Finance Act, 1988 , then—

(a) subject to the following provisions of this subsection, the company shall be chargeable to tax in respect of the profits of that business under Case I of Schedule D,

(b) notwithstanding paragraph (b) of subsection (1), where any part of those profits would, apart from this paragraph, be excluded in computing the income chargeable under Case I of Schedule D solely by virtue of that part being reserved for policyholders or annuitants, that part shall not be excluded in computing the income so chargeable,

(c) the charge to tax under Schedule D of income from investments (hereafter in this subsection referred to as ‘shareholders' investments’), which are not investments of any fund representing the amount of the liability of the company in respect of its business with policyholders and annuitants, shall not be under Case I of that Schedule, and

(d) notwithstanding section 33, section 15 shall apply for computing the profits of the company as respects expenses of management, including commissions, to the extent that those expenses—

(i) are disbursed for the purposes of managing shareholders’ investments, and

(ii) would not, apart from this paragraph, be deductible in computing the profits, or any description of profits, of the company for the purposes of corporation tax.”,

and

(b) by the addition after subsection (2) of the following subsection:

“(3) Where, under the provisions of section 25 (1) of the Insurance Act, 1989 , an assurance company amalgamates its industrial assurance and life assurance funds, subsection (2) shall not apply to that company for any accounting period ending on or after the completion of the amalgamation and before the recommencement, if any, of a separate industrial assurance or life assurance fund:

Provided that, for the purposes of applying section 33, in so far as it is affected by—

(a) management expenses or charges on income which, apart from section 15 (2), would be treated as, respectively, incurred for, or paid in, an accounting period ending before the day on which the amalgamation is completed, or

(b) any loss incurred in such a period,

to a company which has amalgamated its industrial assurance and life assurance funds, subsection (2) shall apply as if the company had not amalgamated its funds.”.

(2) For the purposes of subsection (3) (inserted by this section) of section 35 of the Corporation Tax Act, 1976 , and subsection (1), where an accounting period of an assurance company begins before the day (hereafter in this subsection referred to as “the day of amalgamation”) on which the company completes the amalgamation of its industrial assurance and life assurance funds, and ends on or after the day of amalgamation, that period shall be divided into one part beginning on the day on which the accounting period begins and ending on the day before the day of amalgamation and another part beginning on the day of amalgamation and ending on the day on which the accounting period ends, and both parts of the accounting period shall be treated as if they were separate accounting periods.

Securitisation of assets.

31. —(1) In this section—

qualifying asset” means a loan made by a company (hereafter in this section referred to as “the original lender”) on the security of a mortgage of a freehold or leasehold estate or interest in the ordinary course of a trade carried on by it which consists of or includes the lending of money on such security;

qualifying company” means a company resident in the State which carries on a business of the management of qualifying assets which it acquired from the original lender or original lenders, as the case may be, and does not carry on any other business:

Provided that a company shall not be a qualifying company if any transaction is carried out by it otherwise than by way of a bargain made at arm's length.

(2) For the purposes of the Tax Acts—

(a) activities carried out in the course of a business carried on by a qualifying company shall be deemed to be activities carried out in the course of a trade, the profits or gains of which are chargeable to tax under Case I of Schedule D,

(b) there shall be deducted as an expense of the trade the amount, in so far as it is not—

(i) otherwise deductible, or

(ii) recoverable from the original lender or under any insurance, contract of indemnity or otherwise howsoever,

of any debt which is proved to the satisfaction of the inspector to be bad and of a doubtful debt to the extent that it is estimated to be bad:

Provided that the amount of the debt shall not be deducted under this paragraph unless it would have been deductible as an expense of the trade of the original lender if that debt had been proved or estimated to be bad before it was acquired by the qualifying company, and

(c) where at any time an amount, or part of an amount, which has been deducted as an expense under paragraph (b) is recovered or is no longer estimated to be bad, the amount which has been so deducted shall, in so far as it is recovered or is no longer estimated to be bad, be treated as trading income of the trade at that time.

Amendment of section 39 (meaning of “goods”) of Finance Act, 1980.

32. —(1) Section 39 (as amended by section 41 of the Finance Act, 1990 ) of the Finance Act, 1980 , is hereby amended by the substitution in paragraph (a) of subsection (3) of “Notwithstanding any other provision of the Tax Acts, the definition” for “The definition”, and the said paragraph (a), as so amended, is set out in the Table to this section.

(2) This section shall be deemed to have come into effect as respects any relevant accounting period (within the meaning of section 38 of the Finance Act, 1980 ) beginning on or after the 1st day of April, 1990.

TABLE

(a) Notwithstanding any other provision of the Tax Acts, the definition of “goods” in subsection (1) shall not include goods sold to the intervention agency and, for the purposes of this exclusion, the sale of goods to a person other than the intervention agency shall be deemed to be a sale to the intervention agency if and to the extent that those goods are ultimately sold to the intervention agency.

Amendment of section 39A (relief in relation to income from certain trading operations carried on in Shannon Airport) of Finance Act, 1980.

33. Section 39A (as amended by section 23 of the Finance Act, 1989 ) of the Finance Act, 1980 , is hereby amended—

(a) in subsection (1), by the substitution of the following definition for the definition of “trading operation”:

“‘trading operation’ means any trading operation which, apart from this section and subsection (1CC4) (inserted by section 41 of the Finance Act, 1990 ) of section 39 of this Act is not the manufacture of goods for the purpose of this Chapter but is carried on by a qualified company.”,

and

(b) in subsection (2), by the substitution of “31st day of December, 2005” for “31st day of December, 2000”.

Amendment of section 39B (relief in relation to income from certain trading operations carried on in Custom House Docks Area) of Finance Act, 1980.

34. Section 39B (as amended by section 36 of the Finance Act, 1988 ) of the Finance Act, 1980 , is hereby amended by the substitution in subsection (2) of “31st day of December, 2005” for “31st day of December, 2000”.

Amendment of section 41 (amendment of section 39 (meaning of “goods”) of Finance Act, 1980) of Finance Act, 1990.

35. Section 41 of the Finance Act, 1990 , is hereby amended by the substitution of the following proviso for the proviso to subsection (6):

“Provided that corporation tax payable by a company shall not be reduced by virtue of this section if that corporation tax would not have been so reduced if the provisions of subsection (1CC2) (inserted by the Finance Act, 1987 ) of section 39 of the Finance Act, 1980 , had not been enacted.”.

Implementation of Council Directive No. 90/435/EEC.

36. —(1) (a) In this section—

arrangements” means arrangements having the force of law by virtue of section 361 of the Income Tax Act, 1967 ;

bilateral agreement” means any arrangements, protocol or other agreement between the Government and the government of another Member State;

company” means a company of a Member State;

company of a Member State” has the meaning assigned to it by Article 2 of the Directive;

the Directive” means Council Directive No. 90/435/EEC of 23 July 1990 * , on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States;

distribution” means income from shares or from other rights, not being debt claims, to participate in a company's profits, and includes any amount assimilated to income from shares under the taxation laws of the State of which the company, making the distribution, is resident;

foreign tax” means any tax which—

(i) is payable under the laws of a Member State other than the State, and

(ii) (I) is specified in paragraph (c) of Article 2 of the Directive, or

(II) is substituted for, and is substantially similar to, a tax so specified;

Member State” means a Member State of the European Economic Community;

parent company” means a company resident in the State which owns at least 25 per cent. of the share capital of a company not so resident:

Provided that where a bilateral agreement contains a provision to the effect—

(i) that a company shall only be a parent company during any uninterrupted period of at least two years throughout which at least 25 per cent. of the share capital of the company which is not resident in the State is owned by the first-mentioned company, or

(ii) that—

(I) the requirement (being the requirement for the purposes of this definition) that a company resident in the State own at least 25 per cent. of the share capital of the company which is not so resident shall be treated as a requirement that the company so resident holds at least 25 per cent. of the voting rights in the company which is not so resident, or

(II) the said requirement shall be so treated and a company shall only be a parent company during any uninterrupted period of at least two years throughout which at least 25 per cent. of the voting rights in the company which is not resident in the State is held by the first-mentioned company,

then, in its application to a company to which the provision in the bilateral agreement applies, this definition shall have effect subject to that provision and be construed accordingly.

(b) For the purposes of this section a company shall be a subsidiary of another company which owns shares or holds voting rights in it where the other company's ownership of those shares or holding of those rights is sufficient for that other company to be a parent company.

(c) A word or expression that is used in this section and is also used in the Directive has, unless the contrary intention appears, the same meaning in this section that it has in that Directive.

(2) Subject to subsections (3) and (4), where, on or after the 1st day of January, 1992, a parent company receives a distribution chargeable in the State to corporation tax, other than a distribution in a winding up, from its subsidiary:

(a) credit shall be allowed for—

(i) any withholding tax charged on the distribution by the Federal Republic of Germany, the Hellenic Republic or the Portuguese Republic, pursuant to the derogations provided for in Article 5 of the Directive, and

(ii) any foreign tax, not chargeable directly or by deduction in respect of the distribution, which is borne by the company making the distribution, and is properly attributable to the proportion of its profits which is represented by the distribution, in so far as that foreign tax exceeds so much of any tax credit in respect of the distribution as is payable to the parent company by the Member State in which the company making the distribution is resident,

against corporation tax in respect of the distribution to the extent that credit for such withholding tax and foreign tax would not otherwise be so allowed, and

(b) notwithstanding any provision of Part XXXI of the Income Tax Act, 1967, the distribution shall not be a dividend to which that Part applies.

(3) Where by virtue of paragraph (a) of subsection (2) a company is to be allowed credit for tax payable under the laws of a Member State other than the State, the provisions of Schedule 10 to the Income Tax Act, 1967 , shall have effect for the purposes of that subsection as if—

(a) the provisions of that subsection were arrangements providing that tax so payable shall be allowed as a credit against tax payable in the State, and

(b) references in the said Schedule 10 to a dividend were references to a distribution as defined in this section.

(4) Subsection (2) shall have effect without prejudice to any provision of a bilateral agreement.

Application of section 25 (attribution of distributions to accounting periods) of Finance Act, 1989, to interim dividends.

37. Section 25 (as amended by section 38 of the Finance Act, 1990 ) of the Finance Act, 1989 , shall have effect as respects dividends paid on or after the 6th day of April, 1991, as if in subsection (3) (a) for “6th day of April, 1991” there was substituted “6th day of April, 1992”:

Provided that a company shall not be entitled, by virtue of this section, to specify, in accordance with subsection (1) of the said section 25, that a distribution, being an interim dividend, or part of it is to be treated as made for the accounting period in which it is made where—

(a) the circumstances of the company are such that, if the distribution or the part of it, as the case may be, were treated as made for the accounting period in which it is made, the company would be unable, at the time when the interim dividend is paid, to determine without recourse to estimation, how much of the distribution or the part of it, as the case may be, would, in accordance with subsection (1) of section 45 (as amended by section 24 of the Finance Act, 1989 ) of the Finance Act, 1980 , be treated as a specified distribution for the purposes of subsection (2) of the said section 45, or

(b) that treatment of the distribution or the part of it, as the case may be, as made for the accounting period in which it is made, would facilitate any arrangement whereby the tax credit in respect of a dividend received by a shareholder could exceed the tax credit, if any, in respect of a dividend received by another shareholder, notwithstanding that the shareholdings of those shareholders carry the same or substantially similar rights in respect of dividends and capital.

Amendment of section 30 (pension funds: extension of tax exemptions to dealings in financial futures and traded options) of Finance Act, 1988.

38. —As respects contracts entered into on or after the 1st day of April, 1991, section 30 of the Finance Act, 1988 , is hereby amended by the substitution of the following subsection for subsection (1):

“(1) In this section ‘financial futures’ and ‘traded options’ mean, respectively, financial futures and traded options which are for the time being dealt in or quoted on any futures exchange or any stock exchange, whether or not that exchange is situated in the State”.

Amendment of section 45 (Trust for Community Initiatives) of Finance Act, 1990 .

39. Section 45 of the Finance Act, 1990 , is hereby amended by the substitution, in paragraph (a) of subsection (2), of “31st day of March, 1992” for “31st day of March, 1991”.

Amendment of section 41 (relief from corporation tax in respect of certain dividends from a non-resident subsidiary) of Finance Act, 1988.

40. Section 41 of the Finance Act, 1988 , is hereby amended with effect from the 1st day of January, 1991, in paragraph (a) of subsection (1)—

(a) by the substitution for the definition of “investment plan” of the following:

“‘investment plan’ means a plan of a company resident in the State which is directed towards the creation or maintenance of employment in the State in trading operations carried on, or to be carried on, in the State and which has been submitted—

(i) prior to the commencement of its implementation, or

(ii) where the Minister is satisfied that there was reasonable cause for it to be submitted after the commencement of its implementation, within one year from that commencement,

to the Minister by the company for the purpose of enabling it to claim relief under this section;”,

and

(b) by the substitution for the definition of “relevant dividends” of the following:

“‘relevant dividends’ means dividends, received on or after the 6th day of April, 1988, by a company resident in the State (being the company claiming relief under this section) from a foreign subsidiary of the company, which are—

(i) specified in a certificate given by the Minister under subsection (2), and

(ii) applied, not earlier than the 6th day of April, 1988, and within a period—

(I) which begins one year before the first day on which the dividends so specified are received in the State, or at such earlier time as the Revenue Commissioners may by notice in writing allow, and

(II) which ends two years after the first day on which the dividends so specified are received in the State, or at such later time as the Revenue Commissioners may by notice in writing allow,

for the purposes of an approved investment plan;”.

Exemption from corporation tax of An Bord Pinsean — The Pensions Board.

41. —Notwithstanding any provision of the Corporation Tax Acts, profits arising in any accounting period ending after the 1st day of January, 1991, to An Bord Pinsean — The Pensions Board shall be exempt from corporation tax.

*O.J. No. L 225 of 20.8.1990, p.6.