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PART 1

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Interpretation

1.

(1) In this Schedule, except where the context otherwise requires—

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“aggregate income for the tax year” has the same meaning as in section 531AL;

“aggregate of the tax value of the reduction” means the income tax value of the amount by which all income for which credit is to be allowed for foreign tax is treated as reduced in accordance with subparagraph (3)(c) of paragraph 7 ascertained by subtracting the income tax that is chargeable in respect of the year of assessment from the income tax that would be chargeable if all income for which credit is to be allowed for foreign tax had not been reduced in accordance with subparagraph (3)(c) of paragraph 7;

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“the Irish taxes” means income tax, income levy, universal social charge and corporation tax;

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“EEA Agreement” means the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as adjusted by the Protocol signed at Brussels on 17 March 1993;

“EEA State” means a state which is a contracting party to the EEA Agreement;

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“foreign tax” means—

(a) in the case of any territory in relation to which arrangements have the force of law, any tax chargeable under the laws of that territory for which credit may be allowed under the arrangements, and

(b) in any other case, any tax chargeable in respect of which credit may be allowed by virtue of subparagraph (3) of paragraph 9A.

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“relevant Member State” means—

(a) a Member State of the European Communities, or

(b) not being such a Member State, an EEA State which is a territory with the government of which arrangements having the force of law by virtue of ^[47]>section 826^{<[47][56]>[47]>}section 826(1)(a)^{<[47]<[56][56]>}section 826(1)^<[56] have been made;

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(2A) In the case of any income within the charge to income tax, the credit shall be applied first in reducing the income tax chargeable in respect of that income.

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(2A) For the purposes of subparagraph (2)^[82]> but subject to subparagraph (3)^<[82], where credit is to be allowed against corporation tax for ^[59]>foreign tax in respect of any income of a company (in this subparagraph referred to as “that income”), being income which is taken into account^<[59][59]>foreign tax in respect of any income of a company (in this subparagraph referred to as “that income”), being income (other than income from a trade carried on by the company through a branch or agency in a territory other than the State) which is taken into account^<[59] in computing the profits or gains of a trade carried on by the company in an accounting period, the relevant income shall be so much of the profits or gains of the trade for that accounting period as is determined by the formula—

where—

P is the amount of the profits or gains of the trade for the accounting period before deducting any amount under paragraph 7(3)(c),

I is the amount of that income for the accounting period before deducting any disbursements or expenses of the trade, and

R is the total amount receivable by the company in the carrying on of the trade in the accounting period.

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(a) is charged at the rate specified in section 21A, the rate of corporation tax payable by the company on its income and chargeable gains for the relevant accounting period shall be the rate so specified,

(c) is to be computed in accordance with section 713(3) or 738(2), the rate of corporation tax payable by the company on its income and chargeable gains for the relevant accounting period shall be treated as the standard rate of income tax,

(d) is to be computed in accordance with section 723(6), the rate of corporation tax payable by the company on its income and chargeable gains for the relevant accounting period shall be treated as 20 per cent,

(e) is reduced by virtue of section 644B, ^[15]>by any fraction^<[15] the rate of corporation tax payable by the company on its income and chargeable gains for the relevant accounting period shall be treated as reduced by that fraction,

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(iv) the amount of income of a company treated for the purposes of paragraph 9D as referable to an amount of relevant interest (within the meaning of that paragraph) ^[100]>shall be treated for the purposes of that paragraph^<[100][68]>, ^[76]>and^<[76]<[68]

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(v) the amount of income of a company treated for the purposes of paragraph 9DB as referable to an amount of relevant royalties (within the meaning of that paragraph) ^[101]>shall be treated for the purposes of that paragraph^<[101], ^[77]>and^<[77]

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(vi) the amount of income of a company treated for the purposes of paragraph 9DC as referable to an amount of relevant leasing income (within the meaning of that paragraph) ^[102]>shall be treated for the purposes of that paragraph^<[102],

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^[74]>

(6) (a) The provisions of subparagraph (5), in relation to the allocation of deductions, shall not apply to relevant trading charges on income.

(b) For the purposes of clause (a) “relevant trading charges on income” has the same meaning as in section 243A.

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Limit on total credit — universal social charge.

5A.

(1) The amount of the credit to be allowed against universal social charge for foreign tax in respect of any income—

(a) shall not exceed the sum which would be produced by computing the amount of that income in accordance with Part 18D, and then charging it to universal social charge for the year of assessment for which the credit is to be allowed, but at a rate ascertained by dividing the universal social charge payable by that person for that year by the amount of the aggregate income for the tax year of that person, and

(b) shall be determined (subject to clause (a)) by the formula—

(FT — C) — TV

where—

FT is the foreign tax, including foreign tax not chargeable directly, in respect of the income,

C is the credit allowed against income tax for foreign tax in respect of the income, and

TV is the portion of the aggregate of the tax value of the reduction attributable to the income determined by the formula—

where—

A is the aggregate of the tax value of the reduction,

B is the part of the foreign tax by which the income has been reduced in accordance with subparagraph (3)(c) of paragraph 7, and

C is the aggregate of the reductions by which all income for which credit is to be allowed for foreign tax has been reduced in accordance with subparagraph (3)(c) of paragraph 7.

(2) Subject to subparagraph (1), where an individual is assessed to tax in accordance with section 1017 or 1031C and each spouse or civil partner falls to be charged to universal social charge on his or her share of that income, the amount of the credit to be allowed against universal social charge in respect of each share of that income shall not exceed such part of the credit as bears to that credit the same proportion as the share of each spouse or civil partner in that income bears to that income.

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Effect on computation of income of allowance of credit against universal social charge.

7A.

(1) Where credit for foreign tax is to be allowed against any of the Irish taxes in respect of any income, this paragraph shall apply in relation to the computation for the purposes of universal social charge of the amount of that income.

(2) Where the universal social charge payable depends on the amount received in the State, that amount shall be treated as increased by the amount of the credit allowable against income tax.

(3) Where subparagraph (2) does not apply—

(a) no deduction shall be made for foreign tax (whether in respect of the same or any other income), and

(b) where the income includes a dividend and under the arrangements foreign tax not chargeable directly or by deduction in respect of the dividend is to be taken into account in considering whether any, and if so what, credit is to be allowed against the Irish taxes in respect of the dividend, the amount of the income shall be treated as increased by the amount of the foreign tax not so chargeable which is to be taken into account in computing the amount of the credit.

(4) In relation to the computation of the income of a person for the purposes of paragraph 5A, subparagraphs (1) to (3) shall apply in relation to all income in the case of which credit is to be allowed for foreign tax under any arrangements.

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PART 2

Unilateral Relief

9A

(1) To the extent appearing from the following provisions of this paragraph, relief (in this paragraph referred to as “unilateral relief”) from corporation tax in respect of profits represented by dividends shall be given in respect of tax payable under the law of any territory other than the State by allowing that tax as a credit against corporation tax, notwithstanding that there are not for the time being in force any arrangements providing for such relief.

(2) Unilateral relief shall be such relief as would fall to be given under this Schedule if arrangements with the government of the territory in question containing the provisions in subparagraphs (3) to (5) were in force, and a reference in this Schedule to credit under arrangements shall be construed as ^[7]>including^<[7] a reference to unilateral relief.

(3) Subject to Part 1 and to ^[63]>subparagraph (5)^<[63][63]>subparagraphs (3B) and (5)^<[63], credit for tax paid under the law of a territory other than the State in relation to a relevant dividend paid by a company resident in the territory to a ^[16]>company resident in the State^<[16][16]>company falling within subparagraph (3A)^<[16] shall be allowed against corporation tax attributable to the profits represented by the dividend.

(4) For the purposes of ^[65]>subparagraph (3)^<[65][65]>subparagraphs (3) and (3B)^<[65]—

(a) “tax paid under the law of a territory other than the State in relation to a relevant dividend paid by a company” means—

(i) tax which is directly charged on the dividend, whether by charge to tax, deduction of tax at source or otherwise, and the whole of which tax neither the company nor the recipient would have borne if the dividend had not been paid, and

(ii) tax paid in respect of its profits under the law of the territory by the company paying the dividend in so far as that tax is properly attributable to the proportion of the profits represented by the dividend,

(b) “relevant dividend” means a dividend paid by a company resident in a territory other than the State to a ^[18]>company resident in the State^<[18][18]>company falling within subparagraph (3A)^<[18] which either directly or indirectly owns, or is a subsidiary of a company which directly or indirectly owns, not less than ^[40]>25 per cent^<[40][40]>5 per cent^<[40] of the ordinary share capital of the company paying the dividend; for the purposes of this subparagraph one company is a subsidiary of another company if the other company owns, directly or indirectly, not less than 50 per cent of the ordinary share capital of the first company.

(5) Credit shall not be allowed by virtue of subparagraph (3)—

(a) for tax paid under the law of a territory where there are arrangements with the government of the territory ^[8]>except^[41]>, in respect of taxes covered by those arrangements,^<[41] to the extent that credit may not be given for that tax under those arrangements^<[8],

(b) for any tax which is relevant foreign tax within the meaning of ^[35]>section 449^{<[35][35]>[88]>}section 449 or^<[88] paragraph 9D^<[35], or

(c) for any tax in respect of which credit may be allowed under section 831.

(6) Where—

(a) unilateral relief may be given in respect of a dividend, and

(b) it appears that the assessment to corporation tax made in respect of the dividends is not made in respect of the full amount thereof, or is incorrect having regard to the credit, if any, which falls to be given by way of unilateral relief,

any such assessment may be made or amended as is necessary to ensure that the total amount of the dividend is assessed, and the proper credit, if any, is given in respect thereof.

(7) In this Schedule in its application to unilateral relief, references to tax payable or paid under the law of a territory outside the State include only references to taxes which are charged on income or capital gains and which correspond to corporation tax and capital gains tax.

Dividends Paid Between Related Companies: Relief for Irish and Third Country Taxes

9B.

(1) Where a foreign company pays a dividend to ^[19]>an Irish company^<[19][19]>a company falling within subparagraph (1A) (in this paragraph referred to as the “relevant company”)^<[19] and the foreign company is related to ^[19]>the Irish company^<[19][19]>the relevant company^<[19], then for the purpose of allowing credit under any arrangements against corporation tax in respect of the dividend, there shall, subject to Part 1, be taken into account as if it were tax payable under the law of the territory in which the foreign company is resident—

(a) any income tax or corporation tax payable in the State by the foreign company in respect of its profits, and

(b) any tax which, under the law of any other territory, is payable by the foreign company in respect of its profits.

(2) Where the foreign company has received a dividend from a third company and the third company is related to the foreign company and is connected with ^[21]>the Irish company^<[21][21]>the relevant company^<[21], then, subject to subparagraph (4), ^[12]>there shall be treated for the purposes of subparagraph (1) as tax paid by the foreign company in respect of its profits any underlying tax payable by the third company, to the extent that it would be taken into account^{<[12] [12]>}there shall be treated for the purposes of subparagraph (1) as tax paid by the foreign company in respect of its profits—^<[12]

^[12]>to the extent to which it would be taken into account^<[12] under this Schedule if the dividend had been paid by a foreign company to ^[50]>an Irish company^<[50][50]>a relevant company^<[50] and arrangements had provided for ^[42]>underlying tax to be taken into account.^<[42][42]>underlying tax to be taken into account: and for this purpose there shall, subject to Part 1, be taken into account as if it were tax payable under the law of the territory in which the third company is resident—^<[42]

(3) Where the third company has received a dividend from a fourth company and the fourth company is related to the third company and is connected with ^[21]>the Irish company^<[21][21]>the relevant company^<[21], then, subject to subparagraph (4), tax payable by the fourth company ^[13]>or tax directly charged on the dividend^<[13] shall similarly be treated for the purposes of subparagraph (2) as tax paid by the third company, and so on for successive companies each of which is related to the one before and is connected with the Irish company.

(4) Subparagraphs (2) and (3) are subject to the following limitations—

(a) no tax shall be taken into account in respect of a dividend paid by ^[22]>an Irish company^<[22][22]>a relevant company^<[22] except corporation tax payable in the State and any tax for which that company is entitled to credit under this Schedule, and

(b) no tax shall be taken into account in respect of a dividend paid by a foreign company to another such company unless it could have been taken into account under this Schedule had the other company been ^[22]>an Irish company^<[22][22]>a relevant company^<[22].

(5) (a) In this paragraph—

“foreign company” means a company resident outside the State;

“underlying tax”, in relation to a dividend, means tax borne by the company paying the dividend on the relevant profits (within the meaning of paragraph (8)) in so far as it is properly attributable to the proportion of the relevant profits represented by the dividend.

(b) For the purposes of this paragraph—

(i) a company is related to another company if that other company—

(I) ^[9]>owns^<[9][9]>controls^<[9] directly or indirectly, or

(II) is a subsidiary of a company which ^[9]>owns^<[9][9]>controls^<[9] directly or indirectly,

not less than ^[43]>25 per cent^<[43][43]>5 per cent^<[43] of the ordinary ^[10]>share capital^<[10][10]>voting power^<[10] of the first-mentioned company,

(ii) one company is a subsidiary of another company if the other company owns, directly or indirectly, not less than 50 per cent of the ordinary share capital of the first-mentioned company,

and

(iii) a company is connected with another company if that other company—

(I) ^[9]>owns^<[9][9]>controls^<[9] directly or indirectly, or

(II) is a subsidiary of a company which ^[9]>owns^<[9][9]>controls^<[9] directly or indirectly,

not less than ^[44]>10 per cent^<[44][44]>5 per cent^<[44] of the ordinary ^[10]>share capital^<[10][10]>voting power^<[10] of the first-mentioned company.

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9C

(1) In this paragraph—

“relevant company” means a company which—

(a) is not resident in the State,

(b) is, by virtue of the law of a ^[30]>Member State of the European Communities^<[30][30]>relevant Member State^<[30] other than the State, resident for the purposes of tax in such a Member State, and

(c) carries on a trade in the State through a branch or agency,

and for the purposes of subparagraph (b) of this definition “tax”, in relation to a ^[30]>Member State of the European Communities^<[30][30]>relevant Member State^<[30] other than the State, means any tax imposed in the Member State which corresponds to corporation tax in the State;

“relevant tax” means foreign tax paid in respect of the income or chargeable gains of a branch or agency in the State of a relevant company, other than such tax paid in a territory in which the company is liable to tax by reason of domicile, residence, place of management or other similar criterion.

(2) A relevant company shall, as respects an accounting period, be entitled to such relief under this Schedule in respect of relevant tax as would, if the branch or agency in the State had been a company resident in the State, have been given under any arrangements to that company resident in the State.

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9D

(1)(a) In this paragraph—

“relevant foreign tax”, in relation to interest receivable by a company, means tax—

(i) which under the laws of any foreign territory has been deducted from the amount of the interest,

(ii) which corresponds to income tax or corporation tax,

(iii) which has not been repaid to the company,

(iv) for which credit is not allowable under arrangements, and

(v) which, apart from this paragraph, is not treated under this Schedule as reducing the amount of income;

(b) For the purposes of this paragraph—

(i) the amount of corporation tax which apart from this paragraph would be payable by a company for an accounting period and which is attributable to an amount of relevant interest shall be an amount equal to—

(I) in so far as it is corporation tax charged on profits which under section 26(3) are apportioned to the financial year 2002, 16 per cent, and

(II) in so far as it is corporation tax charged on profits which under section 26(3) are apportioned to the financial year 2003 or any subsequent financial year, 12.5 per cent,

of the amount of the income of the company referable to the amount of the relevant interest ^[38]>reduced by the relevant foreign tax^<[38], and

(ii) the amount of any income of a company referable to an amount of relevant interest in an accounting period ^[39]>increased by the amount of the relevant foreign tax^<[39] shall, subject to paragraph 4(5), be taken to be such sum as bears to the total amount of the trading income of the company for the accounting period the same proportion as the amount of relevant interest in the accounting period bears to the total amount receivable by the company in the course of the trade in the accounting period.

(2) Where, as respects an accounting period of a company, the trading income of a trade carried on by the company includes an amount of relevant interest, the amount of corporation tax which, apart from this paragraph, would be payable by the company for the accounting period shall be reduced by so much of—

(a) in so far as it is corporation tax charged on profits which under section 26(3) are apportioned to the financial year 2002, 84 per cent, and

(b) in so far as it is corporation tax charged on profits which under section 26(3) are apportioned to the financial year 2003 or any subsequent financial year, 87.5 per cent,

of any relevant foreign tax borne by the company in respect of relevant interest in that period as does not exceed the corporation tax which would be so payable and which is attributable to the amount of the relevant interest.

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Unilateral Relief (branch profits)

9DA

(1) To the extent appearing from the following provisions of this paragraph, relief (in this paragraph referred to as “unilateral relief”) from corporation tax in respect of profits of a company from a trade carried on by the company through a branch or agency in a territory other than the State shall be given in respect of tax payable under the law of any territory other than the State by allowing that tax as a credit against corporation tax, notwithstanding that there are not for the time being in force any arrangements providing for such relief.

(2) Unilateral relief shall be such relief as would fall to be given under this Schedule if arrangements with the government of the territory in question containing the provisions in subparagraphs (3) to (5) were in force, and a reference in this Schedule to credit under arrangements shall be construed as including a reference to unilateral relief.

(3) Subject to Part 1 and to subparagraph (5), credit for tax paid under the law of a territory other than the State and computed by reference to income of a company, being a company falling within subparagraph (4), from a trade carried on by it through a branch or agency in that territory shall be allowed against corporation tax in the State computed by reference to that income.

(4) (a) A company falls within this subparagraph if—

(i) it is resident in the State, or

(ii) it is, by virtue of the law of a relevant Member State other than the State, resident for the purposes of tax in such a Member State and the income referred to in subparagraph (3) forms part of the income of a branch or agency of the company in the State.

(b) For the purposes of subparagraph (a)(ii), “tax”, in relation to a relevant Member State other than the State, means any tax imposed in the Member State which corresponds to corporation tax in the State.

(5) Credit shall not be allowed by virtue of subparagraph (3)—

(a) for tax paid under the law of a territory where there are arrangements with the government of the territory except to the extent that credit may not be given for that tax under those arrangements, or

(b) for any tax which is relevant foreign tax within the meaning of ^[90]>section 449 or^<[90] paragraph 9D.

(6) Where—

(a) unilateral relief may be given in respect of any profits, and

(b) it appears that the assessment to corporation tax made in respect of the profits is not made in respect of the full amount thereof, or is incorrect having regard to the credit, if any, which falls to be given by way of unilateral relief,

then any such assessment may be made or amended as is necessary to ensure that the total amount of the profits is assessed, and the proper credit, if any, is given in respect thereof.

(7) In this Schedule in its application to unilateral relief, references to tax payable or paid under the law of a territory outside the State include only references to taxes which are charged on income or capital gains and which correspond to corporation tax and capital gains tax.

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Unilateral Relief (royalty income)

9DB.

(1)(a) In this paragraph—

“relevant foreign tax”, in relation to royalties receivable by a company, means tax—

(i) which under the laws of any foreign territory has been deducted from the amount of the royalty,

(ii) which corresponds to income tax or corporation tax,

(iii) which has not been repaid to the company,

(iv) for which credit is not allowable under arrangements, and

(v) which, apart from this paragraph, is not treated under this Schedule as reducing the amount of income;

“relevant royalties” means royalties receivable by a company—

(i) which fall to be taken into account in computing the trading income of a trade carried on by the company, and

(ii) from which relevant foreign tax is deducted;

“royalties” means payments of any kind as consideration for—

(i) the use of, or the right to use—

(I) any copyright of literary, artistic or scientific work, including cinematograph films and software,

(II) any patent, trade mark, design or model, plan, secret formula or process,

or

(ii) information concerning industrial, commercial or scientific experience.

(b) For the purposes of this paragraph—

(i) the amount of corporation tax which apart from this paragraph would be payable by a company for an accounting period and which is attributable to an amount of relevant royalties shall be an amount equal to 12.5 per cent of the amount by which the amount of the income of the company referable to the amount of the relevant royalties exceeds the relevant foreign tax, and

(ii) the amount of any income of a company referable to an amount of relevant royalties in an accounting period shall, subject to paragraph 4(5), be taken to be such sum as bears to the total amount of the trading income of the company for the accounting period before deducting any relevant foreign tax the same proportion as the amount of relevant royalties in the accounting period bears to the total amount receivable by the company in the course of the trade in the accounting period.

(2) Where, as respects an accounting period of a company, the trading income of a trade carried on by the company includes an amount of relevant royalties, the amount of corporation tax which, apart from this paragraph, would be payable by the company for the accounting period shall be reduced by so much of 87.5 per cent of any relevant foreign tax borne by the company in respect of relevant royalties in that period as does not exceed the corporation tax which would be so payable and which is attributable to the amount of the relevant royalties.

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^[79]>

Unilateral Relief (leasing income)

9DC.

(1) (a) In this paragraph—

“leasing income” means payments of any kind as consideration for the use of, or the right to use, industrial, commercial or scientific equipment;

“relevant foreign tax”, in relation to leasing income receivable by a company, means tax—

(i) which under the laws of any foreign territory has been deducted from the amount of the lease payment,

(ii) which corresponds to income tax or corporation tax,

(iii) which has not been repaid to the company,

(iv) for which credit is not allowable under arrangements, and

(v) which, apart from this paragraph, is not treated under this Schedule as reducing the amount of income;

“relevant leasing income” means leasing income receivable by a company—

(i) which falls to be taken into account in computing the trading income of a trade carried on by the company, and

(ii) from which relevant foreign tax is deducted.

(b) For the purposes of this paragraph—

(i) the amount of corporation tax which apart from this paragraph would be payable by a company for an accounting period and which is attributable to an amount of relevant leasing income shall be an amount equal to 12.5 per cent of the amount by which the amount of the income of the company referable to the amount of the relevant leasing income exceeds the relevant foreign tax, and

(ii) the amount of any income of a company referable to an amount of relevant leasing income in an accounting period shall, subject to paragraph 4(5), be taken to be such sum as bears to the total amount of the trading income of the company for the accounting period before deducting any relevant foreign tax the same proportion as the amount of relevant leasing income in the accounting period bears to the total amount receivable by the company in the course of the trade in the accounting period.

(2) Where, as respects an accounting period of a company, the trading income of a trade carried on by the company includes an amount of relevant leasing income, the amount of corporation tax which, apart from this paragraph, would be payable by the company for the accounting period shall be reduced by so much of 87.5 per cent of any relevant foreign tax borne by the company in respect of relevant leasing income in that period as does not exceed the corporation tax which would be so payable and which is attributable to the amount of the relevant leasing income.

^<[79]

^[58]>

9E

(1) (a) In this paragraph—

“foreign company” means a company resident outside the State;

“unrelieved foreign tax” has the meaning assigned to it in subparagraph (2).

“unrelieved foreign tax in respect of specified dividends” has the meaning assigned to it in subparagraph (3).

(b) For the purposes of this paragraph—

(i) a dividend is a relevant dividend if it is received by a company (in this clause referred to as the “receiving company”) from a company which is not resident in the State (in this clause referred to as the “paying company”) and the paying company is related to the receiving company (within the meaning of paragraph 9B(5)(b)), and

(ii) the aggregate amount of corporation tax payable by a company for an accounting period in respect of any dividends received by the company in the accounting period from foreign companies means so much of the corporation tax that, apart from this paragraph, would be payable by the company for that accounting period as would not have been payable had those dividends not been received by the company.

(2) (a) Where, as respects a relevant dividend received in an accounting period by a company and which is charged to corporation tax in accordance with section 21A, any part of the foreign tax cannot, apart from this paragraph, be allowed as a credit against any of the Irish taxes and, accordingly, the amount of income representing the dividend is treated under paragraph 7(3)(c) as reduced by that part of the foreign tax, then an amount determined by the formula—

where—

R is the rate per cent specified in section 21A(3), and

D is the amount of the part of the foreign tax by which the income is to be treated under paragraph 7(3)(c) as reduced,

shall be treated for the purposes of clause (b) as unrelieved foreign tax of that accounting period.

(b) The aggregate amount of corporation tax payable by a company for an accounting period in respect of relevant dividends received by the company in that accounting period from foreign companies shall be reduced by the unrelieved foreign tax of that accounting period.

(c) Where the unrelieved foreign tax in relation to an accounting period of a company exceeds the aggregate amount of corporation tax payable by the company for the accounting period in respect of relevant dividends received by the company in that accounting period from foreign companies, the excess shall be carried forward and treated as unrelieved foreign tax of the next succeeding accounting period, and so on for succeeding accounting periods.

(3) (a) In this subparagraph “specified dividend” means a relevant dividend which is not charged to corporation tax in accordance with section 21A.

(b) Where, as respects a specified dividend received in an accounting period by a company, any part of the foreign tax cannot, apart from this paragraph, be allowed as a credit against any of the Irish taxes and, accordingly, the amount of income representing the dividend is treated under paragraph 7(3)(c) as reduced by that part of the foreign tax, then an amount determined by the formula—

where—

R is the rate per cent specified in section 21, and

D is the amount of the part of the foreign tax by which the income is to be treated under paragraph 7(3)(c) as reduced,

shall be treated for the purposes of clause (c) as unrelieved foreign tax in respect of specified dividends of that accounting period.

(c) The aggregate amount of corporation tax payable by a company for an accounting period in respect of specified dividends received by the company in that accounting period from foreign companies shall be reduced by the unrelieved foreign tax in respect of specified dividends of that accounting period.

(d) Where the unrelieved foreign tax in respect of specified dividends in relation to an accounting period of a company exceeds the aggregate amount of corporation tax payable by the company for the accounting period in respect of specified dividends received by the company in that accounting period from foreign companies, the excess shall be carried forward and treated as unrelieved foreign tax in respect of specified dividends of the next succeeding accounting period, and so on for succeeding accounting periods.

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^[51]>

9F

(1) (a) In this paragraph—

the “aggregate amount of corporation tax payable by a company for an accounting period in respect of relevant interest of the company for the accounting period from foreign companies” means so much of the corporation tax which, apart from this paragraph, would be payable by the company for that accounting period as would not have been payable had the interest not been chargeable to tax;

“foreign company” means a company resident outside the State;

“foreign tax”, in relation to interest receivable by a company, means tax which—

(i) under the laws of any foreign territory has been deducted from the amount of the interest,

(ii) corresponds to income or corporation tax,

(iii) has not been repaid to the company;

“unrelieved foreign tax” has the meaning assigned to it in subparagraph (2).

(b) For the purposes of this paragraph—

(i) interest which is receivable by a company (in this clause referred to as the “receiving company”) from a company is relevant interest if—

(I) the interest falls to be taken into account in computing the trading income of a trade carried on by the receiving company,

(II) the interest arises from a source within a territory in regard to which arrangements have the force of law, and

(III) one of those companies is the 25 per cent subsidiary of the other or both companies are 25 per cent subsidiaries of a third company,

(ii) subject to subclause (iii), a company shall be deemed to be a 25 per cent subsidiary of another company if and so long as not less then 25 per cent of its ordinary share capital would be treated as owned directly or indirectly by that other company if section 9 (other than subsection (1) of that section) were to apply for the purposes of this paragraph,

(iii) a company (in this subclause referred to as a “subsidiary company”) shall not be deemed to be a 25 per cent subsidiary of another company (in this subclause referred to as the “parent company”) at any time if the percentage—

(I) of any profits, which are available for distribution to equity holders, of the subsidiary company at such time to which the parent company is beneficially entitled at such time, or

(II) of any assets, which are available for distribution to equity holders on a winding up, of the subsidiary company at such time to which the parent company would be beneficially entitled at such time on a winding up of the subsidiary company,

is less than 25 per cent of such profits or assets (as the case may be) of the subsidiary company at such time, and sections 413, 414, 415 and 418 shall, with any necessary modifications but without regards to section 411(1)(c) in so far as it relates to those sections, apply to the determination of the percentage of those profits or assets (as the case may be) to which a company is beneficially entitled as they apply to the determination for the purposes of Chapter 5 of Part 12 of the percentage of any such profits or assets to which a company is so entitled.

(2) Where, as respects any relevant interest received in an accounting period by a company, any part of the foreign tax cannot, apart from this paragraph, be allowed as a credit against corporation tax and, accordingly, the amount of income representing the interest is treated under paragraph 7(3)(c) as reduced by that part of the foreign tax, then an amount determined by the formula—

where—

R is the rate per cent specified in section 21(1), and

D is the amount of the part of the foreign tax by which the income is to be treated under paragraph 7(3)(c) as reduced,

shall be treated for the purposes of subparagraph (3) as unrelieved foreign tax of that accounting period.

(3) The aggregate amount of corporation tax payable by a company for an accounting period in respect of relevant interest of the company for the accounting period from foreign companies shall be reduced by the unrelieved foreign tax of that accounting period.

^<[51]

^[54]>

9FA

(1) In this paragraph—

“aggregate amount of corporation tax payable by a company for an accounting period in respect of foreign branch income of the company for the accounting period” means so much of the corporation tax which, apart from this paragraph, would be payable by the company for that accounting period as would not have been payable had the foreign branch income been disregarded for the purposes of tax;

“foreign branch”, in relation to a company, means a branch or agency of the company in a territory other than the State through which the company carries on a trade in that territory;

“foreign branch income”, in relation to a company, means so much of the income of the company as is attributable to a foreign branch;

“foreign tax”, in relation to foreign branch income of a company, means tax which—

(a) is paid under the laws of the territory in which the foreign branch is situated on income attributable to that branch, and

(b) corresponds to corporation tax.

(2) Where, as respects any foreign branch income of a company for an accounting period, any part of the foreign tax cannot, apart from this paragraph, be allowed as a credit against corporation tax and, accordingly, the amount of the income is treated under paragraph 7(3)(c) as reduced by that part of the foreign tax, then an amount equal to the aggregate of—

(a) where income that is chargeable to tax at the rate specified in section 21(1) for the accounting period is treated under paragraph 7(3)(c) as reduced, an amount determined by the formula—

where—

R is the rate per cent specified in section 21(1), and

D is the amount by which that income is so treated as reduced,

and

(b) where income that is chargeable to tax at the rate specified in section 21A(3) for the accounting period is treated under paragraph 7(3)(c) as reduced, an amount determined by the formula—

where—

R is the rate per cent specified in section 21A(3), and

D is the amount by which that income is so treated as reduced,

shall be treated for the purposes of ^[71]>subparagraph (3)^<[71][71]>subparagraphs (3) and (4)^<[71] as unrelieved foreign tax of that accounting period.

(3) The aggregate amount of corporation tax payable by a company for an accounting period in respect of foreign branch income of the company for the accounting period shall be reduced by the unrelieved foreign tax of that accounting period.

Unilateral Relief (capital gains)

9FB

(1) To the extent appearing from the following provisions of this paragraph, relief (in this paragraph referred to as “unilateral relief”) from capital gains tax (including corporation tax in respect of chargeable gains) in respect of chargeable gains accruing to a person on the disposal of an asset (in this paragraph referred to as a “specified asset”) which is located in a territory other than the State shall be given in respect of tax payable under the law of any specified territory by allowing that tax as a credit against capital gains tax (or as the case may be corporation tax in respect of chargeable gains), notwithstanding that there are not for the time being in force any arrangements providing for such relief.

(2) Unilateral relief shall be such relief as would fall to be given under this Schedule if arrangements with the government of the specified territory in question contained the provisions in subparagraphs (3) and (4), and a reference in this Schedule to credit under arrangements shall be construed as including a reference to unilateral relief.

(3) Subject to Part 1 and to subparagraph (5), credit for tax paid under the law of a specified territory and computed by reference to a capital gain of a person from the disposal by the person of a specified asset, shall be allowed against capital gains tax (or as the case may be corporation tax in respect of chargeable gains) in the State computed by reference to that capital gain.

(4) Credit shall not be allowed by virtue of subparagraph (3) for tax paid under the law of a specified territory to the extent that credit may be given for that tax under—

(a) arrangements with the government of the territory, or

(b) any other provision of this Schedule.

(5) Where—

(a) unilateral relief may be given in respect of any chargeable gain, and

(b) it appears that any assessment made in respect of the chargeable gain is not made in respect of the full amount thereof, or is incorrect having regard to the credit, if any, which falls to be given by way of unilateral relief,

then any such assessment may be made or amended as is necessary to ensure that the total amount of the chargeable gain is assessed, and the proper credit, if any, is given in respect thereof.

(6) In this Schedule in its application to unilateral relief, references to tax payable or paid under the law of a territory outside the State include only references to taxes which are charged on capital gains and which correspond to income tax, corporation tax or capital gains tax.

(7) In this paragraph “specified territory” means any of the following territories with the government of which arrangements have been made, that is to say, the Kingdom of Belgium, Cyprus, the Republic of France, ^[110]>the Federal Republic of Germany,^<[110] the Italian Republic, Japan, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, Pakistan or Zambia.

^<[54]

^[52]>

Dividends paid by companies that are taxed as a group under the law of a territory outside the State

9G

(1) This paragraph applies in any case where—

(a) under the law of a territory outside the State, tax is payable by a company (in this paragraph referred to as the “responsible company”) resident in that territory in respect of the aggregate profits, or aggregate profits and aggregate gains, of that company and one or more other companies (in this paragraph referred to as the “consolidated companies”), taken together as a single taxable entity, and

(b) a dividend is paid—

(i) by any one of the consolidated companies (in this paragraph referred to as the “paying company”) to a company that is not one of the consolidated companies (in this paragraph referred to as the “recipient company”), or

(ii) by a company that is not one of the consolidated companies (in this paragraph referred to as the “third company”) to any one of the consolidated companies.

(2) (a) Where this paragraph applies, then for the purposes of allowing credit under this Schedule for foreign tax in respect of profits attributable to dividends this Schedule shall apply with any necessary modifications as if—

(i) the consolidated companies, taken together, were a single company (in this paragraph referred to as the “single company”),

(ii) any dividend paid by any of the consolidated companies to a recipient company was paid by the single company,

(iii) any dividend paid by a third company to any one of the consolidated companies was paid to the single company,

(iv) the single company is related to the recipient company if the paying company is related to the recipient company,

(v) the third company is related to the single company if the third company is related to that one of the consolidated companies to which it paid the dividend, and

(vi) the single company is resident in the territory in which the responsible company is resident,

so that the relevant profits for the purposes of paragraph 8 is a single aggregate figure in respect of the single company and the foreign tax paid by the responsible company is foreign tax paid by the single company.

(b) For the purposes of this paragraph—

(i) a single company that is treated as paying a dividend shall be treated as connected with a relevant company (within the meaning given to it in paragraph 9B) in relation to the dividend if the company that paid the dividend is connected with that relevant company,

(ii) a relevant dividend (within the meaning given to it in paragraph 9A) paid by any one of the consolidated companies to a recipient company will be treated as a relevant dividend paid by the single company to that recipient company,

(iii) references in paragraph 8 to “body corporate” shall include references to a single company within the meaning of this paragraph.

^<[52]

^[60]>

Dividends paid out of transferred profits

9H

(1) This paragraph applies in any case where—

(a) under the law of a territory outside the State, tax is paid by a company (in this paragraph referred to as the “first company”) resident outside the State in respect of any of its profits,

(b) some or all of those profits become profits of another company (in this paragraph referred to as the “second company”) resident outside the State otherwise than by virtue of the payment of a dividend to the second company, and

(c) the second company pays a dividend out of those profits to another company, wherever resident.

(2) Where this paragraph applies, then for the purposes of allowing credit under this Schedule for foreign tax in respect of profits of the first company attributable to any dividends paid—

(a) by any company (whether or not the second company) resident outside the State,

(b) to a company resident in the State,

this Schedule shall apply with any necessary modifications as if the second company had paid the tax paid by the first company in respect of those profits of the first company which have become profits of the second company in accordance with subparagraph (1)(b).

(3) Subparagraphs (1) and (2) are subject to the following limitations—

(a) the credit against corporation tax allowable to a company resident in the State shall not exceed the amount which would have been allowable to that company had those profits become profits of the second company by virtue of the payment of a dividend by the first company to the second company, and

(b) no tax shall be taken into account in respect of profits referred to in subparagraph (1) where such profits become the profits of the second company by virtue of a scheme or arrangement the purpose or one of the main purposes of which is the avoidance of tax.

^<[60]

^[98]>

Dividends: additional credit.

9I

(1) In this paragraph—

“excluded dividend” means a dividend, or any part of a dividend, paid by a source company to a relevant company, in so far as it is paid out of so much, if any, of the relevant profits of a source company, as—

(a) has not been subject to tax, and

(b) has been received, from a company which is connected with the relevant company and is not resident in a relevant Member State—

(i) directly by means of a dividend or other distribution of profits, being profits which have not been subject to tax, or

(ii) indirectly, from the profits mentioned in subclause (i), by the payment of dividends, or the making of other distributions, by one or more companies, without the income or profits represented by any of those dividends or distributions having been subject to tax;

“relevant company”, in relation to a dividend, means a company that—

(a) is resident in the State, or

(b) is, by virtue of the law of a relevant Member State other than the State, resident for the purposes of tax in such a Member State and the dividend forms part of the profits of a branch or agency in the State;

“relevant dividend” means so much of a dividend as is neither—

(a) an excluded dividend, nor

(b) a dividend which, by virtue of section 21B(4)(c), is not to be taken into account in computing income for corporation tax;

“source company” means a company which—

(a) is not resident in the State, and

(b) is, by virtue of the law of a relevant Member State other than the State, resident for the purposes of tax in such a Member State;

“tax”, except in the case of corporation tax in the State, means—

(a) tax imposed in a country other than the State, which corresponds to such corporation tax, and

(b) tax, corresponding to income tax in the State, which is imposed in a country other than the State by deduction from dividends or other distributions of profits,

but^[107]>, for the purposes of the definition of “excluded dividend” in this subparagraph,^<[107] any tax charged by reference to a dividend or other distribution of profits such that most of the value of that dividend or distribution is exempted from that charge to tax shall be excluded from the meaning of “tax”.

(2) For the purposes of this paragraph, the relevant profits of a source company in relation to a dividend shall be—

(a) if the dividend is paid for a specified period, the profits of that period,

(b) if the dividend is not paid for a specified period but is paid out of specified profits, those profits, or

(c) if the dividend is paid neither for a specified period nor out of specified profits, the profits of the last period for which accounts of the body corporate were made up which ended before the dividend became payable,

but if, in a case within clause (a) or (c), the total dividend exceeds the profits available for distribution of the period mentioned in clause (a) or (c), as the case may be, the relevant profits shall be the profits of that period together with so much of the profits available for distribution of preceding periods (other than profits previously distributed or previously treated as relevant for the purposes of this subparagraph) as is equal to the excess, and for this purpose the profits of the most recent preceding period shall first be taken into account, then the profits of the next most recent preceding period, and so on.

(3) Where a source company pays a relevant dividend to a relevant company then, for the purpose of allowing credit against corporation tax for foreign tax in respect of that dividend, there shall, subject to paragraph 4, and subparagraph (5), be taken into account, as if it were tax payable in respect of that dividend under the law of the territory in which a source company is resident, an amount (referred to in this paragraph as “additional foreign credit”) determined in accordance with subparagraph (4).

(4) The additional foreign credit referred to in subparagraph (3) in respect of a relevant dividend shall be—

(a) where the relevant dividend is subject to corporation tax at the rate specified in section 21(1), an amount determined by the formula—

(A × B) — C

where—

A is the amount of the relevant dividend brought into charge to corporation tax in the State,

B is the lower of—

(i) the rate per cent specified in section 21(1), or

(ii) the rate per cent of tax, which corresponds, in the relevant Member State in which the source company is resident for the purposes of tax, to corporation tax in the State, applicable to the relevant profits in relation to the relevant dividend,

and

C is the amount of the credit for tax against corporation tax attributable to the relevant dividend which, apart from this paragraph, would be allowable under this Schedule,

or

(b) where the relevant dividend is ^[108]>chargeable to corporation tax under Case III of Schedule D^<[108][108]>subject to corporation tax at the rate specified in section 21A(3)(a)^<[108], the amount determined by the formula—

(A × B) —C

where—

A is the amount of the relevant dividend brought into charge to corporation tax in the State,

B is the lower of—

(i) 25 per cent, or

(ii) the rate per cent of tax, which corresponds, in the relevant Member State in which the source company is resident for the purposes of tax, to corporation tax in the State, applicable to the relevant profits in relation to the relevant dividend,

and

C is the amount of the credit for tax against corporation tax attributable to the relevant dividend which, apart from this paragraph, would be allowable under this Schedule.

(5) The provisions of paragraph 9E shall not apply to any additional foreign credit calculated in accordance with this paragraph.

(6) This paragraph shall not apply to dividends paid in any case where paragraph 9H applies.

^<[98]

^[4]>

PART 3

Miscellaneous

^<[4]

^[99]>

14. The provisions of this Schedule shall apply for income levy as they apply for universal social charge with any necessary modifications.

^<[99]