43 Certain securities issued by Minister for Finance

Summary

This section gives an exemption from tax on the capital of and interest on certain Government securities which are in the beneficial ownership of persons who are not resident in the State. This favourable tax treatment is withdrawn in certain circumstances in the case of certain foreign-owned financial businesses.

Details

(1) The Minister for Finance may issue certain Government securities with a condition that both the capital of and the interest on any such security is exempt from income tax or corporation tax. This exemption applies only where the security is in the beneficial ownership of a person or persons who is, or are, not resident in the State. Up to 3 February 2010, this exemption applied where the security was held in the beneficial ownership of a person or persons who were not ordinarily resident in the State.

(2) The exemption does not apply to securities acquired by a company after 29 January, 1992 (regardless of when such securities were issued), where the securities are held by or for an Irish branch or agency of the company and the trade or business being carried on through that branch or agency is a financial trade or business. It is to be noted that the securities must be held by or for the Irish branch or agency. If they are held by the foreign company separately from its Irish branch or agency the exemption continues.

In general, acquisition of securities is to be interpreted as the beneficial acquisition of the securities so that the nominal reacquisition of securities which, before and after that nominal reacquisition, were beneficially owned by a branch is to be ignored.

The requirement that the trade or business be a “financial” trade or business in order for the exemption not to apply is achieved by reference to the basis on which the income from the securities would be charged to tax if no exemption treatment applied – that is, would the income (which as well as interest on the security includes profits on disposal or redemption of the security) from the security be charged to tax as the income from a financial trade or business if the security had been issued without the condition granting the tax exemption. The reference to the Schedule D Case I and Case IV charges ensures that the provision applies to banking and general insurance businesses. (In so far as the reference to the Case IV charge is concerned, it is to be noted that the withdrawal of the exemption applies only to interest and other profits or gains accruing on or after 21 April, 1997.) The reference to the section 726 charge ensures that it applies to life assurance businesses.

Relevant Date: Finance Act 2019