13 Extension of charge to income tax to profits and income derived from activities carried on and employments exercised on the Continental Shelf

Summary

A charge to income tax is imposed on profits/gains from exploration or exploitation activities carried on in the State’s area of the Continental Shelf and from dealings in rights arising from such activities. An income tax charge is also imposed on certain emoluments of employees working on the Continental Shelf.

Details

Definitions

(1) “designated area” is a term used in the Continental Shelf Act, 1968, under section 2 of which the Government has power to make orders to designate areas of the sea bed outside the territorial waters of the State in which the State has exploration and exploitation rights.

“exploration or exploitation activities” means activities carried on in connection with the exploration or exploitation of so much of the sea bed and subsoil and their natural resources as is situated in the State (that is, within the territorial waters of the State) or in a designated area.

“exploration or exploitation rights” means rights to, rights to interests in, or rights to the benefit of, assets generated as a result of exploration or exploration activities. For example, a foreign exploration concern undertaking prospecting surveys/searches in the State’s area of the Continental Shelf has created an asset (namely, the results of the survey) which it could then sell on to say another foreign concern for development/exploitation.

Profits or gains from exploration or exploitation activities or rights

(2) By treating, for income tax purposes, profits/gains from exploration or exploitation activities carried on in a designated area, or from exploration or exploitation rights, as profits/gains from activities or property in the State, the section effectively extends the State’s jurisdiction, for income tax purposes, to include Continental Shelf areas which are designated areas. For example, mining oil in a designated area of the Irish Continental Shelf is to be treated in the same way as if the mining were carried on in the State. It is to be noted, in the case of exploration/exploitation rights, that the charge to tax is not qualified with reference to the place where the underlying transaction takes place. In the earlier example, the profits from the sale of the survey results would be chargeable to tax even where the contract for the sale was executed outside the state.

(3) Profits/gains arising to a non-resident person from exploration or exploitation activities carried on in the State (that is, in Irish territorial waters) or in a designated area as well as profits/gains derived from or exploration or exploitation rights are treated as profits/gains of a trade carried on in the State through a branch or agency. This ensures that the profits of non-residents in relation to such activities and dealings are automatically chargeable to income tax.

(4) Where a non-resident holder of a licence or lease issued under the Petroleum and Other Minerals Development Act, 1960 engages another non-resident company to do the actual exploration work, the latter company may have no ties with this country and there may be no agent in whose name an assessment might be made. In such cases, the licence or lease holder is to be treated as the agent of the person carrying on the exploration work for the purposes of assessment to tax. This enables section 1034 to be applied. Section 1034 ensures that a non-resident may be assessed and charged in the name of any agent, etc, in the same manner as the non-resident would be charged if he/she were resident. (Under Schedule 1 the licence or lease holder may also be called on to pay the appropriate tax). It is to be noted that the situation of an actual licence or lease holder doing the actual exploration or exploitation work is not explicitly catered for. In such a case it may be taken that there will be an agent or some other authorised person in whose name an assessment may be made under section 1034.

Emoluments from office or employment on Continental Shelf

(5) Emoluments of non-resident employees working on the State’s area of the Continental Shelf who are remunerated wholly or partly in the State are brought within the charge to income tax.

Miscellaneous

(6) Supplementary provisions for this section are contained in Schedule 1.

Relevant Date: Finance Act 2019