172D Exemption from dividend withholding tax for certain non-resident persons

Summary

This section provides that from 6 April, 2000 exemption from DWT applies only in the case of relevant distributions made to a non-resident person who is beneficially entitled to the distributions and who is within the following category —

• a person (other than a company) who is neither resident nor ordinarily resident in the State but is resident for tax purposes in a relevant territory and has made a relevant declaration and provided a current certificate to the relevant person.

Arrangements for non-resident companies:

• with regard to relevant distributions received by non-resident companies from Irish resident companies on or after 3 April 2010 the requirement to include a non-resident and/or an auditor’s certificate with an appropriate declaration of entitlement to exemption is removed. Instead non-resident companies need only provide a current declaration and certain information to the dividend paying company or intermediary to claim exemption from DWT in accordance with paragraph 9 of Schedule 2A. The declaration must be a current declaration within the meaning of paragraph 2A of Schedule 2A at the time of the making of the relevant distribution. Declarations/certificates provided by qualifying non-resident companies before 3 April 2010 for the purposes of claiming exemption from DWT will remain valid until their current expiry date has passed.

Details

Exemption from DWT for qualifying non-resident persons

(2) DWT does not apply in respect of relevant distributions made by an Irish resident company to a qualifying non-resident person on or after 6 April, 2000.

Qualifying non-resident persons

(3) A qualifying non-resident person is a person who is beneficially entitled to the distributions and is within the following category —

• (a)(i), (ii), (iii) a person (other than a company) who is neither resident nor ordinarily resident in the State and who is by virtue of the law of a relevant territory, resident for tax purposes in the relevant territory. To qualify for exemption, the person must make to the company making the distribution the appropriate declaration of entitlement to exemption as set out in paragraph 8 of Schedule 2A accompanied by a certificate (within the meaning of subparagraph (f) of the paragraph) which is a current certificate (within the meaning of paragraph 2 of Schedule 2A).

Arrangements for non-resident companies (Distributions received on or after 3 April 2010):

• (b)(i) a non-resident company which by virtue of the law of a relevant territory is resident for the purposes of tax in the relevant territory and which is not controlled by Irish residents,
• (b)(ii) a non-resident company which is controlled by a person or persons who by virtue of the law of a relevant territory is or are resident for the purposes of tax in the relevant territory who is or are not under the control of a person or persons not so resident,
• (b)(iii) a non-resident company the principal class of shares of which, or of a company of which it is a 75 per cent subsidiary, or where the company is wholly owned by two or more companies each of whose principal class of shares, is substantially and regularly traded on a recognised stock exchange in a relevant territory or territories, in the State (in respect of distributions made on or after 1 February 2007), or on or on such other stock exchange as may be approved of by the Minister for Finance.

To claim exemption from DWT, a non-resident company must provide a current declaration and certain information to the dividend paying company or intermediary in accordance with paragraph 9 of Schedule 2A. The declaration must be a current declaration within the meaning of paragraph 2A of Schedule 2A at the time of the making of the relevant distribution. Declarations/certificates provided by qualifying non-resident companies before 3 April 2010 for the purposes of claiming exemption from DWT will remain valid until their current expiry date has passed.

Revenue eBrief No. 26/2010 of 14 April 2010 provides further information with regard to self-certification for non-resident companies.

It should also be noted that if the qualifying non-resident person is a trust, the declaration must (see paragraph 8(g) of Schedule 2A) be accompanied by two documents, namely, a certificate signed by the trustee or trustees of the trust showing the names and addresses of the beneficiaries and settlors of the trust and a notice by Revenue stating that it has noted the contents of that certificate.

Meaning of “control” in subsection (3)(b)(i)

(3A) The word “control” is to be construed in accordance with subsections (2) to (6) of section 432 (which define the meaning of “control” in the context of close companies) as if in subsection (6) of that section for “5 or fewer participators” there were substituted “persons resident in the State”. In effect, this means that if the rules for determining who “controls” a company as set out in those subsections can be applied in such a way as to enable control of the company to be exercised by a person or persons (however many in number) resident in the State, then those rules are to be so applied.

(3B) The exemptions in subsections (2) and (3) do not apply to a distribution which is a property income dividend paid by a Real Estate Investment Trust (REIT) within the meaning of section 705A.

Meaning of “control” in subsection (3)(b)(ii)

(4) The word “control” is to be construed in accordance with subsections (2) to (6) of section 432, but as if in subsection (6) of that section new wording were substituted for the phrase “5 or fewer participators”. The new wording is —

• in so far as the first mention of “control” in subsection (3)(b)(ii) is concerned, “persons who, by virtue of the law of a relevant territory, are resident for the purposes of tax in such a relevant territory”, and
• in so far as the second mention of “control” in that subsection is concerned, “persons who are not resident for the purposes of tax in a relevant territory”.

The effect of this is that for the purposes of subsection (3)(b)(ii) if the rules of subsections (2) to (6) of section 432 for determining who “controls” a company can be applied in such a way as to enable control of the company to be exercised by persons (however many in number) resident for tax purposes in a relevant territory, then those rules are to be so applied. Similarly, if those rules can be applied in such a way as to enable those persons in turn to be controlled by other persons who are not resident for tax purposes in a relevant territory, then the rules are to be so applied.

Meaning of “75 per cent subsidiary”

(5) In so far as subsection (3)(b)(iii)(I) is concerned, the provisions of sections 412 to 418 apply for the purposes of determining whether a company is a 75 per cent subsidiary of another company. This ensures that a company may only be treated as a 75 per cent subsidiary of another company if that other company has a 75 per cent entitlement in the company in regard to the holding of shares, profits on a distribution and a share of assets on a winding-up. In so applying the provisions in question, section 411(1)(c) is treated as deleted. This deemed deletion is necessary as otherwise a company resident outside of the EU would not be treated as owning any share capital which it owned directly or indirectly in a company which is not resident in the State.

Company wholly owned by two or more other companies

(6) This provision is supplementary to subsection (3)(b)(iii)(II) It provides that a company (an “aggregated 100 per cent subsidiary) is to be treated as being wholly-owned by 2 or more companies (the “joint parent companies”) if and so long as 100 per cent of the ordinary share capital of the aggregated 100 per cent subsidiary is owned, directly or indirectly, by the joint parent companies.

For this purpose, subsections (2) to (10) of section 9 apply as they apply for the purposes of that section. The subsections in question set out rules for the determination of the ownership of the ordinary share capital of one company by another company, whether that ownership is held directly or indirectly through one or more other companies.

For this purpose too, sections 412 to 418 apply with any necessary modifications as those sections apply for the purposes of Chapter 5 (group relief) of Part 12. This ensures that a company may only be treated as an aggregated 100 per cent subsidiary of the joint parent companies if, in addition to owning 100 per cent of the ordinary share capital of that company, the joint parent companies between them also have a 100 per cent entitlement in the company in regard to profits on a distribution and a share of assets on a winding up. However, in so applying the provisions of these sections, two specific modifications are treated as having been made. Firstly, section 411(1)(c) is treated as deleted. This deemed deletion is necessary as otherwise companies outside the EU would not be taken into account in establishing ownership of a company. Secondly, a new subsection is treated as replacing the existing subsection (1) of section 412. This is considered necessary to more accurately reflect the concept of an aggregated 100 per cent subsidiary of joint parent companies – the real subsection (1) of section 412 deals with the concept of 75 per cent or 90 per cent ownership of a company by one other company.

Relevant Date: Finance Act 2019