|
|
|
Amendment of section 831B of Principal Act (participation exemption for certain foreign distributions)
|
| |
47. (1) Section 831B of the Principal Act is amended—
|
|
| |
(a) in subsection (1)—
|
|
| |
(i) by the substitution of the following definition for the definition of “relevant subsidiary”:
|
|
| |
“ ‘relevant subsidiary’, in relation to a relevant distribution, means a company that—
|
|
| |
(a) is, on the date on which it makes the relevant distribution—
|
|
| |
(i) by virtue of the law of a relevant territory, resident for the purposes of foreign tax in the relevant territory, and
|
|
| |
(ii) not generally exempt from foreign tax,
|
|
| |
(b) throughout the relevant period—
|
|
| |
(i) was—
|
|
| |
(I) by virtue of the law of a relevant territory, resident for the purposes of foreign tax in the relevant territory, and
|
|
| |
(II) not generally exempt from foreign tax,
|
|
| |
or
|
|
| |
(ii) was resident in the State,
|
|
| |
(c) did not, at any time during the reference period, make an excluded acquisition, and
|
|
| |
(d) was not formed through a merger at any time during the reference period, where a party to the merger was another company (in this paragraph referred to as ‘the second-mentioned company’) that was not resident in the State or that was not, by virtue of the law of a relevant territory, resident for the purposes of foreign tax in a relevant territory—
|
|
| |
(i) from the date the reference period commences until the date the merger takes place, or
|
|
| |
(ii) where the second-mentioned company was incorporated or formed during the reference period, from the date the second mentioned company was incorporated or formed until the date the merger takes place;”,
|
|
| |
(ii) by the insertion of the following definitions:
|
|
| |
“ ‘excluded acquisition’ means an acquisition by a company of—
|
|
| |
(a) another business or part of another business, or
|
|
| |
(b) the whole or greater part of the assets used for the purposes of another business,
|
|
| |
where the business concerned was previously carried on by another company (in this definition referred to as ‘the second-mentioned company’) that was not resident in the State or that was not, by virtue of the law of a relevant territory, resident for the purposes of foreign tax in a relevant territory—
|
|
| |
(i) from the date the reference period commences until the date the acquisition takes place, or
|
|
| |
(ii) where the second-mentioned company was incorporated or formed during the reference period, from the date the second-mentioned company was incorporated or formed until the date the acquisition takes place,
|
|
| |
but does not include the acquisition by a company of share capital in another company;
|
|
| |
‘foreign withholding tax’ means a tax which—
|
|
| |
(a) is directly chargeable on a distribution made by a company that is, by virtue of the law of a territory other than the State, resident for the purposes of foreign tax in that territory, to a company that is not so resident, whether by charge to tax, deduction of tax at source or otherwise, and
|
|
| |
(b) is imposed at a nominal rate greater than zero per cent;”,
|
|
| |
(iii) in the definition of “reference period”, by the substitution of “3 years” for “5 years”,
|
|
| |
(iv) in the definition of “relevant distribution”—
|
|
| |
(I) in paragraph (b)(ii), by the insertion of “where subparagraph (i) does not apply,” before “out of the assets of the relevant subsidiary”, and
|
|
| |
(II) in clause (I), by the insertion of “other than a tax that is similar or corresponds to the surcharge referred to in section 440 and which is imposed on a company where the greater part of the issued share capital of the company or the greater part of the voting power in the company is held by 5 or fewer individuals” after “the law of that territory”,
|
|
| |
(v) in the definition of “relevant period”, in paragraph (a)(i), by the substitution of “3 years” for “5 years”, and
|
|
| |
(vi) in the definition of “relevant territory”—
|
|
| |
(I) in paragraph (b), by the substitution of “have been made,” for “have been made, or”,
|
|
| |
(II) in paragraph (c), by the substitution of “the force of law, or” for “the force of law,”, and
|
|
| |
(III) by the insertion of the following paragraph after paragraph (c):
|
|
| |
“(d) not being a territory referred to in paragraph (a), (b) or (c), a territory (referred to in this section as a ‘specified territory’) which generally imposes a foreign withholding tax on distributions,”,
|
|
| |
(b) by the insertion of the following subsection after subsection (1):
|
|
| |
“(1A) For the purposes of the definition, in subsection (1), of ‘relevant territory’, a territory referred to in paragraph (b) or (c), as the case may be, of that definition shall be regarded as a relevant territory from the date that is 3 years immediately preceding the date on which the arrangements referred to in the said paragraph (b) or (c), as the case may be, have been made.”,
|
|
| |
(c) in subsection (5)—
|
|
| |
(i) in paragraph (a), by the substitution of “the relevant distribution is made,” for “the relevant distribution is made, and”,
|
|
| |
(ii) in paragraph (b)—
|
|
| |
(I) by the insertion of “other than out of the profits (within the meaning of section 21B(1)(a)) of the relevant subsidiary,” before “where any gain”, and
|
|
| |
(II) by the substitution of “section 626B, and” for “section 626B.”,
|
|
| |
and
|
|
| |
(iii) by the insertion of the following paragraph after paragraph (b):
|
|
| |
“(c) if the relevant subsidiary that makes the relevant distribution is, by virtue of the law of a specified territory, resident for the purposes of foreign tax in the specified territory on the date on which it makes the relevant distribution, where foreign withholding tax has been paid by the relevant subsidiary on the full amount of the relevant distribution and has not been and does not fall to be repaid, in whole or in part, to any person.”,
|
|
| |
and
|
|
| |
(d) by the insertion of the following subsection after subsection (8):
|
|
| |
“(9) For the purposes of this section, where the law of a relevant territory does not determine the residence of a company for the purposes of foreign tax and the company is not resident for the purposes of foreign tax in another relevant territory by virtue of the law of that other relevant territory, then—
|
|
| |
(a) that company shall be regarded as resident for the purposes of foreign tax in the relevant territory where that company is regarded as so resident for the purposes of any arrangements having the force of law by virtue of section 826(1), and
|
|
| |
(b) that company shall be regarded as not generally exempt from foreign tax where that company is not generally exempt from a tax which—
|
|
| |
(i) corresponds to corporation tax in the State,
|
|
| |
(ii) generally applies to income, profits and gains arising in the relevant territory referred to in paragraph (a), and
|
|
| |
(iii) is imposed at a nominal rate greater than zero per cent.”.
|
|
| |
(2) Subject to subsection (3), subsection (1) shall apply in respect of a relevant distribution (within the meaning of section 831B of the Principal Act) made on or after 1 January 2026.
|
|
| |
(3) The following provisions of subsection (1) shall be deemed to apply in respect of a relevant distribution (within the meaning of section 831B of the Principal Act) made on or after 1 January 2025:
|
|
| |
(a) paragraph (a)(i);
|
|
| |
(b) paragraph (a)(ii), insofar as it relates to the insertion of the definition of “excluded acquisition” in section 831B(1) of the Principal Act.
|
