77 Miscellaneous special rules for computation of income

Summary

Miscellaneous special rules apply to modify the operation of income tax law as applied to corporation tax by section 76. The date on which a company begins or ceases to carry on a trade, or begins or ceases to be within the charge to corporation tax, is taken to be the date of commencement or cessation of the trade, as the case may be, even though the trade was previously, or may thereafter be, carried on by someone else. The deduction of yearly interest for the purposes of computing trading income is allowed. Expenses of management of mineral rights are allowable in computing income from the letting of those rights, subject to the same restrictions as for the income tax relief. The income of an Irish resident company from a trade carried on wholly abroad, although chargeable under Case III of Schedule D, is computed in accordance with the rules of Case I of Schedule D. Foreign income tax is allowable as a deduction from income from foreign securities and possessions. Also foreign tax is allowed as a deduction where the trading income of a trade carried on by a company includes relevant royalties or relevant interest then the amount of the income, relating to that relevant royalty or interest, chargeable to tax can be reduced by the relevant foreign tax attaching to that income. The reduction for foreign tax cannot exceed the amount of income which is chargeable to Irish tax, therefore relief from double taxation cannot result in the creation of a loss for tax purposes. Finally foreign income, mainly rents, interest and dividends, arising to a non-resident company from property attributable to a branch or agency though which the company trades in the State is chargeable to corporation tax under Case III of Schedule D in the same way as a resident company would be charged on such foreign income.

Details

General

(1) Certain modifications set out in this section apply to the application of income tax law for corporation tax purposes.

Computation of income on commencement/discontinuance

(2) Where a company begins to trade or comes within the charge to corporation tax in respect of a trade, its income is to be computed as though the trade has begun at that point even though the trade was previously carried on by some other person. Similarly, where a company ceases to carry on a trade or to be within the charge to corporation tax in respect of a trade, the company’s income is computed as if the trade were discontinued at that point even though it may thereafter be carried on by someone else. This rule does not apply where there is specific provision that a trade is not to be treated as permanently discontinued. An example of such a case is that provided for in section 303(3) which secures, in relation to capital allowances for expenditure on dredging, that a balancing allowance is given only on the actual discontinuance of the trade involved as distinct from a change of ownership which for assessment purposes is treated as a permanent discontinuance.

Treatment of yearly interest

(3) In the computation of trading income section 76(5) does not prevent the deduction of yearly interest.

Mineral rights

(4) The income tax deduction given under section 111 to owners of mineral rights for management expenses is also given for corporation tax purposes, restricted to the same extent as the income tax relief may be restricted.

Foreign trades

(5) In the case of a resident company assessable under Case III of Schedule D in respect of a trade carried on wholly abroad, the income from such a trade is computed in accordance with the principles applicable to Case I of Schedule D.

Foreign income tax

(6) A deduction is allowed in computing income for corporation tax purposes for foreign income tax paid on income from foreign securities and possessions.

Foreign Interest

(6A) Where, for an accounting period, the trading income of a trade carried on by a company includes interest (referred to as relevant interest) the amount of the income, relating to that interest, chargeable to tax may be reduced by the relevant foreign withholding tax attaching to that income. However, the reduction is limited to the amount of the income for corporation tax purposes relating to the relevant interest i.e. the Irish measure of the income.

Foreign Royalties

(6B) Where, for an accounting period, the trading income of a trade carried on by a company includes royalties (referred to as relevant royalties) the amount of the income, relating to that royalty income, chargeable to tax may be reduced by the relevant foreign tax attaching to that income. However, the reduction is limited to the amount of the income for corporation tax purposes relating to the relevant royalties i.e. the Irish measure of the income.

Non-resident companies

(7) A non-resident company may be assessed to corporation tax under Case III of Schedule D on income from foreign securities and possessions in so far as under section 25(2) the company is chargeable on such income. This would arise where the income arises from property or rights used or held by or on behalf of a branch or agency through which the non-resident company trades in the State. It is to be noted that the subsection does not affect the normal case where a non-resident is not chargeable to tax on foreign income or on interest on Government and certain other securities to which section 49 applies.

Relevant Date: Finance Act 2019