Corporation Tax Act, 1976

Certain expenses for participators and associates.

96.—(1) Subject to such exceptions as are mentioned in section 84 (matters to be treated as distributions) “distribution”, in relation to a close company, includes unless otherwise stated any such amount as is required to be treated as a distribution by subsection (2).

(2) Where a close company incurs expense in or in connection with the provision for any participator of living or other accommodation, of entertainment, of domestic or other services, or of other benefits or facilities of whatever nature, the company shall be treated as making a distribution to him of an amount equal to so much of that expense as is not made good to the company by the participator:

Provided that this subsection shall not apply to expense incurred in or in connection with the provision of benefits or facilities for a person to whom section 117 of the Income Tax Act, 1967 (benefits in kind), applies as a director or employee of the company, or the provision for the spouse, children or dependants of any such person of any pension, annuity, lump sum, gratuity or other like benefit to be given on his death or retirement.

(3) Any reference in subsection (2) to expense incurred in or in connection with any matter includes a reference to a proper proportion of any expense incurred partly in or in connection with that matter; and section 118 of the Income Tax Act, 1967 (valuation of benefits in kind), shall apply for the purposes of that subsection as it applies for the purposes of section 117 of the Income Tax Act, 1967 , references to that subsection being substituted for references to section 117 (1).

(4) Subsection (2) shall not apply if the company and the participator are both resident in the State and—

(a) one is a subsidiary of the other or both are subsidiaries of a third company also so resident, and

(b) the benefit to the participator arises on or in connection with the transfer of assets or liabilities by the company to him, or to the company by him.

(5) The question whether one company is a subsidiary of another for the purpose of subsection (4) shall be determined as a question whether it is a 51 per cent. subsidiary of that other, except that that other shall be treated as not being the owner—

(a) of any share capital which it owns directly in a company if a profit on a sale of the shares would be treated as a trading receipt of its trade; or

(b) of any share capital which it owns indirectly, and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt; or

(c) of any share capital which it owns directly or indirectly in a company not resident in the State.

(6) Where each of two or more close companies makes a payment to a person who is not a participator in that company, but is a participator in another of those companies, and the companies are acting in concert or under arrangements made by any person, then each of those companies and any participator in it shall be treated as if the payment made to him had been made by that company.

This subsection shall apply, with any necessary adaptations, in relation to the giving of any consideration, and to the provision of any facilities, as it applies in relation to the making of a payment.

(7) For the purposes of this section any reference to a participator includes an associate of a participator, and any participator in a company which controls another company shall be treated as being also a participator in that other company.