49 Exemption of certain securities

Summary

On and from 4 April, 2009, securities on which interest is payable without deduction of tax by virtue of a direction given by the Minister for Finance in pursuance of section 37, 38, 39, 40 or 41 may be issued with the condition that neither the capital nor the interest is liable to tax if the security is in the beneficial ownership of a person who is not resident in the State (other than certain foreign owned financial businesses). However, the exemption does not apply as respects such securities acquired by a company after 15 May, 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.

Prior to 4 April 2009, this favourable tax treatment applied where the security was issued with either or both of the following conditions:

• that neither the capital nor the interest is liable to tax if the security is in the beneficial ownership of a person who is neither domiciled nor ordinarily resident in the State, or
• that the interest on the securities is not liable to tax if the security is in the beneficial ownership of a person who, though domiciled in the State, is not ordinarily resident in the State.

Details

(1) & (2) Any stock or other security on which interest is payable without deduction of tax by virtue of a direction given by the Minister for Finance in pursuance of section 37, 38, 39, 40 or 41 may be issued with the condition that neither the capital of nor the interest on such securities is liable to tax if it is shown in the manner directed by the Minister for Finance that the securities are in the beneficial ownership of persons who are not resident in the State.

(3) However, the exemption does not apply as respects such securities acquired by a company after 15 May, 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 applies.

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 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 the provision applies to life assurance businesses.

Relevant Date: Finance Act 2019