831A Treatment of distributions to certain parent companies

Summary

This section provides benefits comparable to those in the 1990 EU Parent/Subsidiaries Directive to companies resident in Switzerland.

The background to this is the agreement between the EU and Switzerland under which Switzerland undertook to adopt equivalent measures to those in the EU Savings Directive.

Implementation of the Savings Directive was conditional on, amongst other things, agreements being entered into with certain countries including Switzerland. An agreement was concluded with Switzerland in 2004. One of the terms of the agreement with Switzerland was that Swiss companies would be afforded the benefits of the 1990 Parent/Subsidiaries Directive.

Under the agreement with Switzerland, dividend payments of the type covered by the Directive made by subsidiary companies in Ireland to their parent companies in Switzerland are to be paid without deduction of tax. The conditions under which they are to be paid without deduction of tax are set out in the section.

The principal conditions are:

• the recipient must be a company resident in Switzerland (and not resident outside the EU or Switzerland under a tax treaty) or a Swiss branch of a company of another Member State,
• the recipient must be subject to tax in Switzerland, and
• the company must be a type of company specified in the agreement with Switzerland.

The new rules apply from 1 July 2005.

Details

Definitions

“company” is defined as a company that is tax resident in Switzerland and that satisfies both of the following conditions:

• (1)(a)(i) it must be a type of company that is mentioned in the agreement between the EU and Switzerland providing for measures equivalent to those in the EU Savings Directive.
• (1)(a)(ii) it must be subject to tax in Switzerland and not be exempt.

(1)(a) “parent company” is defined as a company which controls 25% of the voting power in another company.

(1)(a) “tax” is defined in relation to Switzerland as any tax in Switzerland that corresponds to income tax or corporation tax in Ireland.

(1)(b) A company is regarded as a subsidiary of another company if the other company holds such rights as are sufficient to enable it to be regarded as a parent company.

Non-application of Withholding tax

(2) Dividend withholding tax under Chapter 8A of Part 6 does not apply to a distribution made to a parent company resident in Switzerland by its subsidiary which is an Irish-resident company.

The new section applies as respects distributions made on or after 1 July 2005, the date on which the EU Savings Directive is scheduled to come into effect.

Relevant Date: Finance Act 2019