Double Taxation Relief for individuals subject to the High Earners Restriction

Practitioners should note that a number of changes were made to the High Earners Restriction by the Finance (No 2) Act 2013.

The key changes were:

• a change in the way in which double taxation relief is granted in situations where the Restriction applies,
• the specifying of capital allowances on plant and machinery claimed by a passive trader when leasing the plant and machinery to a manufacturing trade, as a relief to which the Restriction applies,
• removing from the scope of the Restriction, investments in the Employment and Investment Incentive Scheme where the subscription for eligible shares was made after 15 October and before 1 January 2017.

In granting double taxation relief in situations where the Restriction applies, the effective rate which should be used when foreign income is being re-grossed is calculated as tax (after application of the high earners restriction) over adjusted income. Before this amendment, the effective rate was calculated as tax (before application of high earners restriction) over total income. This change will grant additional relief in some cases and was necessary to ensure that full effect was given to relief provided by double taxation treaties.

This change is retrospective and applies to claims to relief contained in tax returns submitted on or after 1 January 2008. A taxpayer who is entitled to a greater tax credit for double taxation under this provision than under the pre Finance (No. 2) Act 2013 provisions, may make a claim for repayment of tax. For 2012 and previous years of assessment, ROS will not calculate the correct double tax relief. Therefore, so that Revenue can assess if any such claim is a valid claim (under section 865), each claim should be supported by calculations showing how the revised claim to double taxation relief was arrived at.

Further details are contained in Part 15-02A-05 of the Income Tax, Capital Gains Tax and Corporation Tax Manual on the Revenue website.

29 August 2014