Finance Act 2007 - Double Taxation Relief

Section 36 amends the provisions on double taxation relief, as follows:

Foreign branch profits: The section provides unilateral credit relief for foreign tax suffered by the company that has a branch or agency in a country with which Ireland does not have a tax treaty. This allows such a company to reduce its Irish corporation tax liability by the foreign tax suffered on the profits of the branch or agency. In the absence of such relief, the company would only be entitled to a deduction for the foreign tax in computing its taxable income. The section also allows pooling in the case of foreign branch profits. Where the foreign tax on branch profits in one country exceeds the Irish tax on those profits, the credit is limited under existing law to the amount of the Irish tax on those profits and no credit can be given for the balance of the foreign tax. Pooling allows such surplus foreign tax to be credited against tax on branch profits in other countries in the year concerned.

Capital Gains Tax: The section provides unilateral credit relief for tax suffered on capital gains in certain countries. The countries concerned are: Belgium, Cyprus, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Pakistan and Zambia. In these cases Ireland has a tax treaty that pre-dates the introduction of capital gains tax in the State. The section provides that, where a person, whether an individual or company, who is chargeable to tax in the State in respect of a capital gain, suffers tax on the gain in the other country concerned, the foreign tax will be credited against Irish capital gains tax on the gain. The purpose of the provision is to grant relief from Irish tax in these specific situations, thereby relieving double taxation.