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39 1997

TAXES CONSOLIDATION ACT, 1997

CHAPTER 3

Provisions applying to overseas life assurance companies

Investment income.

[CTA76 s43; FA93 s11(h); FA95 s64; FA96 s132(2) and Sch5 PtII]

726. —(1) Any income of an overseas life assurance company from the investments of its life assurance fund (excluding the pension fund, general annuity fund and special investment fund, if any), wherever received, shall, to the extent provided in this section, be deemed to be profits comprised in Schedule D, and shall be charged to corporation tax under Case III of Schedule D.

(2) Distributions received from companies resident in the State shall be taken into account under this section notwithstanding their exclusion from the charge to corporation tax.

(3) Where an overseas life assurance company is entitled to an amount (in this subsection referred to as “the first amount”), being an amount which corresponds to a tax credit, by virtue of having received a distribution from a company not resident in the State, the distribution shall be treated for the purposes of this section as representing income equal to the aggregate of the amount or value of that distribution and the first amount.

(4) A portion only of the income from the investments of the life assurance fund (excluding the pension fund, general annuity fund and special investment fund, if any) shall be charged in accordance with subsection (1), and for any accounting period that portion shall be determined by the formula—

A × B

_____

C

where—

A is the total income from those investments for that period,

B is the average of the liabilities for that period to policyholders resident in the State and to policyholders resident outside the State whose proposals were made to the company at or through its branch or agency in the State, and

C is the average of the liabilities for that period to all the company's policyholders,

but any reference in this subsection to liabilities does not include liabilities in respect of special investment, general annuity or pension business.

(5) For the purposes of this section—

(a) the liabilities of an assurance company attributable to any business at any time shall be ascertained by reference to the net liabilities of the company as valued by an actuary for the purposes of the relevant periodical return, and

(b) the average of any liabilities for an accounting period shall be taken as 50 per cent of the aggregate of the liabilities at the beginning and end of the valuation period which coincides with that accounting period or in which that accounting period falls.

(6) (a) For the purposes of this subsection—

(i) “the average of branch liabilities for an accounting period” means the aggregate of the amounts represented by B in subsection (4), B in section 727 (2) and the average of the liabilities attributable to pension business for the accounting period, and

(ii) “the assets to which this subsection applies” are assets the gains from the disposal of which are chargeable to corporation tax by virtue of subsections (3) and (6) of section 29 together with assets the gains from the disposal of which would be so chargeable but for sections 551 , 607 and 613 .

(b) Where the average of branch liabilities for an accounting period exceeds the mean value for the accounting period of the assets to which this subsection applies, the amount to be included in profits under section 78 (1) shall be an amount determined by the formula—

A × B

_____

C

where—

A is the amount which apart from this subsection would be so included in profits,

B is the average of branch liabilities for the accounting period, and

C is the mean value for the accounting period of the assets to which this subsection applies.

(7) Section 70 (1) as applied to corporation tax shall not apply to income to which subsection (1) applies.

General annuity and pension business.

[CTA76 s44]

727. —(1) Nothing in the Corporation Tax Acts shall prevent the distributions of companies resident in the State from being taken into account as part of the profits in computing under section 715 the profits arising from pension business and general annuity business to an overseas life assurance company.

(2) Any charge to tax under section 715 for any accounting period on profits arising to an overseas life assurance company from general annuity business shall extend only to a portion of the profits arising from that business, and that portion shall be determined by the formula—

A × B

_____

C

where—

A is the total amount of those profits,

B is the average of the liabilities attributable to that business for the relevant accounting period in respect of contracts with persons resident in the State or contracts with persons resident outside the State whose proposals were made to the company at or through its branch or agency in the State, and

C is the average of the liabilities attributable to that business for that accounting period in respect of all contracts.

(3) For the purposes of this section—

(a) the liabilities of an assurance company attributable to general annuity business at any time shall be ascertained by reference to the net liabilities of the company as valued by an actuary for the purposes of the relevant periodical return, and

(b) the average of any liabilities for an accounting period shall be taken as 50 per cent of the aggregate of the liabilities at the beginning and end of the valuation period which coincides with that accounting period or in which that accounting period falls.

Expenses of management.

[CTA76 s33(3); FA92 s44(b)]

728. —The relief under section 707 available to an overseas life assurance company in respect of its expenses of management shall be limited to expenses attributable to the life assurance business carried on by the company at or through its branch or agency in the State.

Income tax, foreign tax and tax credit.

[CTA76 s45; FA88 s31(2) and Sch2 PtI par2(2); FA97 s37 and Sch2 pars1 and 2]

729. —(1) Section 77 (6) shall not affect the liability to tax of an overseas life assurance company in respect of the investment income of its life assurance fund under section 726 or in respect of the profits of its annuity business under sections 715 , 717 and 727 .

(2) For the purposes of section 25 (3) as it applies to life business, the amount of the income tax referred to in that section which shall be available for set-off under that section in an accounting period shall be limited in accordance with subsections (3) and (4).

(3) Where the company is chargeable to corporation tax for an accounting period in accordance with section 726 in respect of the income from the investments of its life assurance fund, the amount of income tax available for set-off against any corporation tax assessed for that period on that income shall not exceed an amount equal to income tax at the standard rate on the portion of income from investments which is chargeable to corporation tax by virtue of subsection (4) of that section.

(4) Where the company is chargeable to corporation tax for an accounting period in accordance with section 727 on a proportion of the total amount of the profits arising from its general annuity business, the amount of income tax available for set-off against any corporation tax assessed for that period on those profits shall not exceed an amount equal to income tax at the standard rate on the like proportion of the income from investments included in computing those profits.

(5) Where an overseas life assurance company receives a distribution in respect of which it is entitled to a tax credit, the company may claim to have that credit set off against any corporation tax assessed on the company under section 726 or 727 for the accounting period in which the distribution is received, but the amount of the tax credit, or aggregate of tax credits if more than one distribution has been received, which may be so set off shall not exceed an amount determined by the formula—

S × (A − B)

___________

100

where—

S is the standard credit rate per cent for the year of assessment in which the distribution is made,

A is the portion of the income from investments which is chargeable to corporation tax by virtue of section 726 (4) or, as the case may be, the portion determined in accordance with subsection (4) of the income from investments included in computing the total amount of the profits of the company arising from its general annuity business, and

B is the aggregate of the payments, the income tax on which, having regard to subsection (3) or (4), as the case may be, the company is entitled to set off against corporation tax by virtue of a claim under section 25 (3).

(6) Section 828 (4) shall not affect the liability to tax under section 726 of an overseas life assurance company in respect of gains from the disposal of investments held in connection with its life business.

(7) For the purposes of subsection (5), where an accounting period begins before the 6th day of April, 1997, and ends on or after that date, it shall be divided into one part beginning on the day which the accounting period begins and ending on the 5th day of April, 1997, and another part beginning on the 6th day of April, 1997, and ending on the day on which the accounting period ends and both parts shall be treated as separate accounting periods.

Tax credit in respect of distributions.

[CTA76 s46; FA93 s11(i)]

730. —Where an overseas life assurance company—

(a) receives a distribution from a company resident in the State, and

(b) is not entitled to, or disclaims, by notice in writing to the appropriate inspector (within the meaning of section 950 (1)), relief in respect of the distribution under—

(i) the Convention set out in Schedule 25 as applied for corporation tax, or

(ii) arrangements made under section 826 as applied for corporation tax,

then, the overseas life assurance company shall be deemed to be entitled to such a tax credit in respect of the distribution as it would be entitled to if it were a company resident in the State, and accordingly the income represented by the distribution shall be the aggregate of the distribution and the tax credit.