806Charge to income tax on transfer of assets abroad.

[FA74 s57 preamble and (1) to (7) and (8)(a), (b), (c), (e) and (f)]

(1) ^[3]>In this section—^<[3][3]>In this section and section 807A—^<[3]

“assets” includes property or rights of any kind;

“associated operation”, in relation to any transfer, means an operation of any kind effected by any person in relation to any of the assets transferred or any assets representing whether directly or indirectly any of the assets transferred, or to the income arising from any such assets, or to any assets representing whether directly or indirectly the accumulations of income arising from any such assets; ^[6]>and for the purposes of this definition it is immaterial whether the operation is effected before, after, or at the same time as the transfer;^<[6]

“benefit” includes a payment of any kind;

“company” means any body corporate or unincorporated association;

“transfer”, in relation to rights, includes the creation of those rights.

(2) ^[4]>For the purposes of this section—^<[4][4]>For the purposes of this section and section 807A—^<[4]

(a) any body corporate incorporated outside the State shall be treated as if it were resident out of the State whether it is so resident or not,

(b) a reference to an individual shall be deemed to include the ^[13]>husband or wife^<[13][13]>husband, wife or civil partner^<[13] of the individual, ^[7]>and^<[7]

(c) references to assets representing any assets, income or accumulations of income include references to shares in or obligations of any company to which, or obligations of any other person to whom, those assets, that income or those accumulations are or have been ^[8]>transferred.^<[8][8]>transferred,^<[8]

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(d) the income that becomes payable to, or has become income of, a person resident or domiciled out of the State that is referred to in subsection (3) or (5) or in section 807A(1) includes any income which becomes payable to, or has become income of, the person by virtue or in consequence of—

(i) the transfer,

(ii) one or more associated operations, or

(iii) the transfer and one or more associated operations,

and

(e) the income which an individual has power to enjoy, as referred to in subsection (4), includes any income which that individual has power to enjoy by virtue or in consequence of—

(i) the transfer,

(ii) one or more associated operations, or

(iii) the transfer and one or more associated operations.

^<[9]

(3) This section shall apply for the purpose of preventing the avoidance by ^[1]>individuals ordinarily resident in the State^<[1][1]>individuals resident or ordinarily resident in the State^<[1] of liability to income tax by means of transfers of assets by virtue or in consequence of which, either alone or in conjunction with associated operations, income becomes payable to persons resident or domiciled out of the State.

(4) Where by virtue or in consequence of any such transfer, either alone or in conjunction with associated operations, such an individual has power to enjoy (within the meaning of this section), whether forthwith or in the future, any income of a person resident or domiciled out of the State which, if it were income of that individual received by that individual in the State, would be chargeable to tax by deduction or otherwise, that income shall, whether it would or would not have been chargeable to tax apart from this section, be deemed to be income of that individual for the purposes of the Income Tax Acts.

(5)(a) In this subsection, “capital sum” means—

(i) any sum paid or payable by means of loan or repayment of a loan, and

(ii) any other sum paid or payable otherwise than as income, being a sum not paid or payable for full consideration in money or money’s worth.

(b) Where, whether before or after any such transfer, such an individual receives or is entitled to receive any capital sum the payment of which is in any way connected with the transfer or any associated operation, any income which, by virtue or in consequence of the transfer, either alone or in conjunction with associated operations, has become the income of a person resident or domiciled out of the State shall, whether it would or would not have been chargeable to tax apart from this section, be deemed to be the income of that individual for the purposes of the Income Tax Acts.

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(c) For the purposes of paragraph (b), there shall be treated as a capital sum which an individual receives or is entitled to receive any sum which a third person receives or is entitled to receive at the individual’s direction or by virtue of the assignment by the individual of the individual’s right to receive it.

^<[5]

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(5A) Nothing in subsection (3) shall be taken to imply that the provisions of subsections (4) and (5) apply only if—

(a) the individual in question was resident or ordinarily resident in the State at the time when the transfer was made, or

(b) the avoidance of liability to income tax is the purpose, or one of the purposes, for which the transfer was effected.

^<[2]

(6) An individual shall for the purposes of this section be deemed to have power to enjoy income of a person resident or domiciled out of the State where—

(a) the income is in fact so dealt with by any person as to be calculated, at some point of time and whether in the form of income or not, to enure for the benefit of the individual,

(b) the receipt or accrual of the income operates to increase the value to the individual of any assets held by the individual or for the individual’s benefit,

(c) the individual receives or is entitled to receive at any time any benefit provided or to be provided out of that income or out of moneys which are or will be available for the purpose by reason of the effect or successive effects of the associated operations on that income and on any assets which directly or indirectly represent that income,

(d) the individual has power, by means of the exercise of any power of appointment or power of revocation or otherwise, to obtain for himself or herself, whether with or without the consent of any other person, the beneficial enjoyment of the income, or may in the event of the exercise of any power vested in any other person become entitled to the beneficial enjoyment of the income, or

(e) the individual is able, in any manner whatever and whether directly or indirectly, to control the application of the income.

(7) In determining whether an individual has power to enjoy income within the meaning of this section, regard shall be had to the substantial result and effect of the transfer and any associated operations, and all benefits which may at any time accrue to the individual (whether or not the individual has rights at law or in equity in or to those benefits) as a result of the transfer and any associated operations shall be taken into account irrespective of the nature or form of the benefits.

(8) ^[10]>Subsections (4) and (5)^<[10][10]>Subject to section 807B, subsections (4) and (5)^<[10] shall not apply where ^[15]>the individual shows in writing or otherwise to the satisfaction of the Revenue Commissioners^<[15]—

(a) ^[17]>that^<[17] the purpose of avoiding liability to taxation was not the purpose or one of the purposes for which the transfer or associated operations or any of them was effected, or

(b) ^[18]>that^<[18] the transfer and any associated operations were bona fide commercial transactions and were not designed for the purpose of avoiding liability to taxation.

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(9) In any case where a person is aggrieved by a decision taken by the Revenue Commissioners in exercise of their functions under ^[11]>subsection (8)^<[11][11]>subsection (8) or (10) or section 807B or 807C^<[11], the person shall be entitled to appeal to the Appeal Commissioners against the decision of the Revenue Commissioners and the Appeal Commissioners shall hear and determine the appeal as if it were an appeal against an assessment to tax, and the provisions of the Income Tax Acts relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications.

^<[21]

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(10) (a) In this subsection—

“commercial transaction” does not include—

(i) a transaction on terms other than those that would have been made between independent persons dealing at arm’s length, or

(ii) a transaction that would not have been entered into between independent persons dealing at arm’s length;

“independent persons” means persons who are not connected with each other (within the meaning of section 10);

“relevant transactions” means—

(i) the transfer, and

(ii) any associated operations.

(b) Subject to section 807B, subsections (4) and (5) shall not apply by reference to the relevant transactions where ^[16]>the individual shows in writing or otherwise to the satisfaction of the Revenue Commissioners^<[16]—

(i) ^[19]>that^<[19] it would not be reasonable to draw the conclusion, from all the circumstances of the case, ^[19]>that^<[19] the purpose of avoiding liability to taxation was the purpose, or one of the purposes, for which the relevant transactions or any of them were effected, or

(ii) in a case where the condition in subparagraph (i) is not met, ^[20]>that^<[20]—

(I) all the relevant transactions were genuine commercial transactions, and

(II) it would not be reasonable to draw the conclusion, from all the circumstances of the case, that any one or more of those transactions was more than incidentally designed for the purpose of avoiding liability to taxation.

(c) The intentions and purposes of any person who, whether or not for consideration—

(i) designs or effects the relevant transactions or any of them, or

(ii) provides advice in relation to the relevant transactions or any of them,

are to be taken into account in determining the purposes for which those transactions or any of them were effected.

(d) A relevant transaction is a commercial transaction only if it is effected—

(i) in the course of a trade or business, or

(ii) with a view to setting up and commencing a trade or business,

and, in either cases, for the purposes of such trade or business.

(e) For the purposes of paragraph (d), the making and managing of investments, or the making or managing of investments, is not a trade or business except to the extent that—

(i) the person by whom it is done, and

(ii) the person for whom it is done,

are independent persons dealing at arm’s length.

(f) Any associated operation that would not (apart from this paragraph) fall to be taken into account for the purposes of this subsection shall be taken into account for those purposes if, were it to be so taken into account, the conditions in paragraph (b) would be failed by reference to—

(i) that associated operation, or

(ii) that associated operation taken together with the transfer or any one or more other associated operations.

^<[12]

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(11) (a) For the purposes of this subsection—

“non-resident person” means a person resident or domiciled out of the State as referred to in subsection (3) or (5);

“relevant Member State” means a state, other than the State, which is a Member State of the European Union, or not being such a Member State, a state which is a contracting party to 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;

“relevant transactions” has the same meaning as it has in subsection (10).

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(b) Where a non-resident person is resident in a relevant Member State, subsection (10) shall apply as if the following were substituted for paragraphs (b), (c), (d) and (e) of that subsection:

‘(b) Subsections (4) and (5) shall not apply where the individual concerned shows in writing or otherwise to the satisfaction of the Revenue Commissioners that—

^<[22]

^[22]>

(b) Where a non-resident person is resident in a relevant Member State, subsection (10) shall apply as if the following were substituted for paragraphs (b), (c), (d) and (e) of that subsection:

“(b) Subsections (4) and (5) shall not apply where the individual concerned shows in writing or otherwise to the satisfaction of the Revenue Commissioners that genuine economic activities are carried on by the non-resident person in the relevant Member State.”

^<[22]

(i)it would not be reasonable to draw the conclusion that the relevant transactions form part of any arrangement or scheme of which the main purpose is, or one of the main purposes is, the avoidance of a liability to tax, and

(ii)genuine economic activities are carried on by the nonresident person in the relevant Member State.’.

^<[14]