Finance Act, 1955
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SECOND SCHEDULE. Reciprocal Relief of Double Taxation in respect of Irish Income Tax, Sur-Tax and Corporation Profits Tax and Canadian Income Taxes, including Surtaxes. | ||
Part I. | ||
Agreement between the Government of Ireland and the Government of Canada for the avoidance of Double Taxation and the prevention of fiscal evasion with respect to Taxes on Income. | ||
The Government of Ireland and the Government of Canada, | ||
Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, | ||
Have appointed for that purpose as their Plenipotentiaries: | ||
The Government of Ireland: | ||
Sean Murphy, Ambassador Extraordinary and Plenipotentiary of Ireland at Ottawa; | ||
The Government of Canada: | ||
Walter E. Harris, Minister of Finance in the Government of Canada, | ||
Who, having communicated their respective full powers, found in good and due form, have agreed as follows:— | ||
Article I. | ||
1. The taxes which are subject to this Agreement are: | ||
(a) In Canada: | ||
Income taxes, including surtaxes, which are imposed by the Government of Canada (hereinafter referred to as “Canadian tax”). | ||
(b) In Ireland: | ||
The income tax (including sur-tax) and the corporation profits tax (hereinafter referred to as “Irish tax”). | ||
2. This Agreement shall also apply to any other taxes of a substantially similar character, other than excess profits taxes, imposed by either Contracting Government subsequent to the signing of this Agreement. | ||
Article II. | ||
1. In this Agreement, unless the context otherwise requires: | ||
(a) The terms “one of the territories” and “the other territory” mean Ireland or Canada, as the context requires. | ||
(b) The term “tax” means Irish tax or Canadian tax, as the context requires. | ||
(c) The term “person” includes any body of persons, corporate or not corporate. | ||
(d) The term “company” includes any body corporate. | ||
(e) The terms “resident of Ireland” and “resident of Canada” mean respectively any person who is resident in Ireland for the purposes of Irish tax and not resident in Canada for the purposes of Canadian tax and any person who is resident in Canada for the purposes of Canadian tax and not resident in Ireland for the purposes of Irish tax; a company shall be regarded as resident in Ireland if its business is managed and controlled in Ireland and as resident in Canada if its business is managed and controlled in Canada. Provided that nothing in this paragraph shall affect any provisions of the law of Ireland regarding the imposition of corporation profits tax in the case of a company incorporated in Ireland. | ||
(f) The terms “resident of one of the territories” and “resident of the other territory” mean a person who is a resident of Ireland or a person who is a resident of Canada, as the context requires. | ||
(g) The terms “Irish enterprise” and “Canadian enterprise” mean respectively an industrial or commercial enterprise or undertaking carried on by a resident of Ireland and an industrial or commercial enterprise or undertaking carried on by a resident of Canada; and the terms “enterprise of one of the territories” and “enterprise of the other territory” mean an Irish enterprise or a Canadian enterprise, as the context requires. | ||
(h) The term “permanent establishment”, when used with respect to an enterprise of one of the territories, means a branch or other fixed place of business, but does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of the enterprise or has a stock of merchandise from which he regularly fills orders on its behalf. In this connection— | ||
(i) An enterprise of one of the territories shall not be deemed to have a permanent establishment in the other territory merely because it carries on business dealings in that other territory through a bona fide broker or general commission agent acting in the ordinary course of his business as such; | ||
(ii) the fact that an enterprise of one of the territories maintains in the other territory a fixed place of business exclusively for the purchase of goods or merchandise shall not of itself constitute that fixed place of business a permanent establishment of the enterprise; | ||
(iii) the fact that a company which is a resident of one of the territories has a subsidiary company which is a resident of the other territory or which carries on a trade or business in that other territory (whether through a permanent establishment or otherwise) shall not of itself constitute that subsidiary company a permanent establishment of its parent company. | ||
2. The term “industrial or commercial profits”, as used in the present Agreement, does not include income in the form of dividends, interest, rents or royalties, management charges, or remuneration for labour or personal services. | ||
3. In the application of the provisions of the present Agreement by one of the Contracting Governments any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting Government relating to the taxes which are the subject of the present Agreement. | ||
Article III. | ||
1. The industrial or commercial profits of an Irish enterprise shall not be subject to Canadian tax unless the enterprise is engaged in trade or business in Canada through a permanent establishment situated therein. If it is so engaged, tax may be imposed on those profits by Canada, but only on so much of them as is attributable to that permanent establishment. | ||
2. The industrial or commercial profits of a Canadian enterprise shall not be subject to Irish tax unless the enterprise is engaged in trade or business in Ireland through a permanent establishment situated therein. If it is so engaged, tax may be imposed on those profits by Ireland, but only on so much of them as is attributable to that permanent establishment. | ||
3. Where an enterprise of one of the territories is engaged in trade or business in the other territory through a permanent establishment situated therein, there shall be attributed to such permanent establishment the industrial or commercial profits which it might be expected to derive in that other territory if it were an independent enterprise engaged in the same or similar activities under the same or similar conditions and dealing at arm's length with the enterprise of which it is a permanent establishment. | ||
4. No portion of any profits arising to an enterprise of one of the territories shall be attributed to a permanent establishment situated in the other territory by reason of the mere purchase of goods or merchandise within that other territory by the enterprise. | ||
5. Where a company which is a resident of one of the territories derives profits or income from sources within the other territory, the Government of that other territory shall not impose any form of taxation on dividends paid by the company to persons not resident in that other territory, or any tax in the nature of an undistributed profits tax on undistributed profits of the company, by reason of the fact that those dividends or undistributed profits represent, in whole or in part, profits or income so derived. | ||
Article IV. | ||
Where | ||
(a) an enterprise of one of the territories participates directly or indirectly in the management, control or capital of an enterprise of the other territory, or | ||
(b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of one of the territories and an enterprise of the other territory, and | ||
in either case conditions are made or imposed between the two enterprises, in their commercial or financial relations, which differ from those which would be made between independent enterprises, | ||
then any profits which but for those conditions would have accrued to one of the enterprises but by reason of those conditions have not so accrued may be included in the profits of that enterprise and taxed accordingly. | ||
Article V. | ||
Notwithstanding the provisions of Articles III and IV, profits which a resident of one of the territories derives from operating ships or aircraft shall be exempt from tax in the other territory. | ||
Article VI. | ||
1. The rate of Canadian tax on income (other than income from carrying on business in Canada or from performing duties in Canada) derived from sources within Canada by a resident of Ireland shall not exceed 15%. | ||
2. Notwithstanding the provisions of the foregoing paragraph, the Canadian tax on dividends paid to a company which is a resident of Ireland by a company resident in Canada, more than 50 per cent. of whose shares which have under all circumstances full voting rights are owned by the former company, shall not exceed 5 per cent. | ||
3. Income (other than income from carrying on business in Ireland or from performing duties in Ireland) derived from sources within Ireland by an individual who is a resident of Canada shall be exempt from Irish surtax. | ||
Article VII. | ||
Copyright royalties and other like payments made in respect of the production or reproduction of any literary, dramatic, musical or artistic work (but not including rents or royalties in respect of motion picture films) and derived from sources within one of the territories by a resident of the other territory shall be exempt from tax in that first-mentioned territory. | ||
Article VIII. | ||
1. Remuneration (other than pensions) paid by one of the Contracting Governments to any individual for services rendered to that Government in the discharge of governmental functions shall be exempt from tax in the territory of the other Contracting Government if the individual is not ordinarily resident in that territory or is ordinarily resident in that territory solely for the purpose of rendering those services. | ||
2. The provisions of this Article shall not apply to payments in respect of services rendered in connection with any trade or business carried on by either of the Contracting Governments for purposes of profit. | ||
Article IX. | ||
1. A resident of Ireland shall be exempt from Canadian tax upon compensation for personal (including professional) services performed during the taxation year within Canada if he is present therein for a period or periods not exceeding a total of 183 days during the taxation year and either of the following conditions is met: | ||
(a) His compensation is received for such personal services performed as an officer or employee of a resident of Ireland, or | ||
(b) His compensation received for such personal services does not exceed $5,000. | ||
2. The provisions of paragraph 1 of this Article shall apply, mutatis mutandis, to a resident of Canada with respect to compensation for such personal services performed in Ireland. | ||
Article X. | ||
1. Any pension or annuity derived from sources within Canada by an individual who is a resident of Ireland shall be exempt from Canadian tax. | ||
2. Any pension or annuity derived from sources within Ireland by an individual who is a resident of Canada shall be exempt from Irish tax. | ||
3. The term “annuity” means a stated sum payable periodically at stated times, during life or during a specified or ascertainable period of time, under an obligation to make the payments in return for adequate and full consideration in money or money's worth. | ||
Article XI. | ||
A professor or teacher from one of the territories who receives remuneration for teaching, during a period of temporary residence not exceeding two years, at a university, college, school or other educational institution in the other territory, shall be exempt from tax in that other territory in respect of that remuneration. | ||
Article XII. | ||
A student or business apprentice from one of the territories who is receiving full-time education or training in the other territory shall be exempt from tax in that other territory on payments made to him by persons in the first-mentioned territory for the purposes of his maintenance, education or training. | ||
Article XIII. | ||
1. As far as may be in accordance with the provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada, Irish tax payable in respect of income from sources within Ireland shall be deducted from any Canadian tax payable in respect of that income. For this purpose the recipient of a dividend paid by a corporation which is a resident of Ireland shall be deemed to have paid the Irish income tax appropriate to such dividend if such recipient elects to include in his gross income for the purposes of Canadian tax the amount of such Irish income tax. For the purposes only of this Article, income derived from sources in the United Kingdom by an individual who is resident in Ireland shall be deemed to be income from sources in Ireland if such income is not subject to United Kingdom income tax. | ||
2. Subject to such provisions (which shall not affect the general principle hereof) as may be enacted in Ireland, Canadian tax payable in respect of income from sources within Canada shall be allowed as a credit against any Irish tax payable in respect of that income. Where such income is an ordinary dividend paid by a Canadian corporation, such credit shall take into account (in addition to any Canadian income tax deducted from or imposed on such dividend) the Canadian income tax imposed on such corporation in respect of its profits, and where it is a dividend paid on participating preference shares and representing both a dividend at the fixed rate to which the shares are entitled and an additional participation in profits, such tax on profits shall likewise be taken into account in so far as the dividend exceeds such fixed rate. | ||
3. For the purposes of this Article, profits or remuneration for personal (including professional) services performed in one of the territories shall be deemed to be income from sources within that territory, and the services of an individual whose services are wholly or mainly performed in ships or aircraft operated by a resident of one of the territories shall be deemed to be performed in that territory. | ||
Article XIV. | ||
1. The taxation authorities of the Contracting Governments shall upon request exchange such information (being information available under the respective taxation laws of the Contracting Governments) as is necessary for carrying out the provisions of the present Agreement or for the prevention of fraud or the administration of statutory provisions against legal avoidance in relation to the taxes which are the subject of the present Agreement. Any information so exchanged shall be treated as secret and shall not be disclosed to any persons other than those concerned with the assessment and collection of the taxes which are the subject of the present Agreement. No information shall be exchanged which would disclose any trade secret or trade process. | ||
2. The taxation authorities of the Contracting Governments may consult together as may be necessary for the purpose of carrying out the provisions of the present Agreement and, in particular, the provisions of Articles III and IV. | ||
3. As used in this Article, the term “taxation authorities” means, in the case of Canada, the Minister of National Revenue or his authorised representative; in the case of Ireland, the Revenue Commissioners or their authorised representative. | ||
Article XV. | ||
1. The present Agreement shall be ratified and the instruments of ratification shall be exchanged at Dublin as soon as possible. | ||
2. Upon exchange of ratifications, the present Agreement shall have effect— | ||
(a) in respect of Canadian tax, for the taxation years beginning on or after the 1st day of January in the calendar year in which the exchange of instruments of ratification takes place; | ||
(b) (i) in respect of Irish income tax, for the year of assessment, beginning on the 6th day of April in the calendar year in which the exchange of instruments of ratification takes place and subsequent years; | ||
(ii) in respect of Irish surtax, for the year of assessment beginning on the 6th day of April immediately preceding the calendar year in which the exchange of instruments of ratification takes place, and subsequent years; and | ||
(iii) in respect of Irish corporation profits tax, for any chargeable accounting period beginning on or after the 1st day of April in the calendar year in which the exchange of instruments of ratification takes place, and for the unexpired portion of any chargeable accounting period current at that date. | ||
Article XVI. | ||
This Agreement shall continue in effect indefinitely but either of the Contracting Governments may on or before the 30th day of June in any calendar year following the calendar year in which the exchange of instruments of ratification takes place, give to the other Contracting Government notice of termination, and in such event this Agreement shall cease to be effective— | ||
(a) in respect of Canadian tax, for the taxation years beginning on or after the 1st day of January in the calendar year next following that in which notice is given; | ||
(b) (i) in respect of Irish income tax, for any year of assessment beginning on or after the 6th day of April in the calendar year next following that in which such notice is given; | ||
(ii) in respect of Irish surtax, for any year of assessment beginning on or after the 6th day of April in the calendar year in which such notice is given; and | ||
(iii) in respect of Irish corporation profits tax, for any chargeable accounting period beginning on or after the 1st day of April in the calendar year next following that in which such notice is given and for the unexpired portion of any chargeable accounting period current at that date. | ||
IN WITNESS WHEREOF the above-named Plenipotentiaries have signed the present Agreement and have affixed thereto their seals. | ||
DONE at Ottawa, in duplicate, this 28th day of October, nineteen hundred and fifty-four. | ||
FOR IRELAND: | ||
Sean Murphy. | ||
FOR CANADA: | ||
W. E. Harris. | ||
Part II. | ||
Provisions as to relief from income tax (including sur-tax) and corporation profits tax by way of credit in respect of Canadian tax. | ||
Interpretation. | ||
1. In this Part of the Schedule— | ||
the expression “the Agreement” means the agreement set forth in Part I of this Schedule; | ||
the expression “income tax” includes sur-tax except where the context otherwise requires; | ||
the expression “income,” in relation to corporation profits tax, means profits; | ||
the expression “the Irish taxes” means income tax (including sur-tax) and corporation profits tax; | ||
the expression “Canadian tax” has the same meaning as in Article I of the Agreement. | ||
General. | ||
2. (1) Subject to the provisions of this Part of this Schedule, where, under the Agreement, credit is to be allowed against any of the Irish taxes chargeable in respect of any income, the amount of the Irish taxes so chargeable shall be reduced by the amount of the credit. | ||
(2) The credit to be allowed shall be first applied in reducing the amount of any corporation profits tax chargeable in respect of the income and, so far as it cannot be so applied, in reducing the income tax chargeable in respect thereof. | ||
(3) Nothing in this paragraph authorises the allowance of credit against any Irish tax against which credit is not allowable under the Agreement. | ||
Requirements as to incorporation and residence. | ||
3. (1) Credit shall not be allowed against corporation profits tax unless the company in respect of whose income the corporation profits tax is chargeable is incorporated by or under the laws of the State. | ||
(2) Credit shall not be allowed against income tax for any year of assessment unless the person in respect of whose income the tax is chargeable is resident in the State for that year. | ||
Limit on total credit—corporation profits tax. | ||
4. The amount of the credit to be allowed against corporation profits tax for Canadian tax in respect of any income shall not exceed the corporation profits tax attributable to that income. | ||
Limit on total credit—income tax. | ||
5. (1) The amount of the credit to be allowed against income tax for Canadian tax in respect of any income shall not exceed the sum which would be produced by computing the amount of that income in accordance with the Income Tax Acts (including this Act), and then charging it to income tax for the year of assessment for which the credit is to be allowed, but at the following rate, that is to say— | ||
(a) in the case of a person whose income is chargeable to income tax but not to sur-tax, a rate ascertained by dividing the income tax payable by that person for that year by the amount of the total income of that person for that year; | ||
(b) in the case of a person whose income is chargeable to sur-tax, the sum of the following rates— | ||
(i) the rate which would have been the appropriate rate in his case if his income had been chargeable to income tax but not to sur-tax; and | ||
(ii) the rate ascertained by dividing the sur-tax payable by him for that year by the amount of his total income for that year: | ||
Provided that where, under the Agreement, credit is not to be allowed against sur-tax for the year, the rate shall be calculated in all cases as in the case of persons whose incomes are chargeable to income tax but not to sur-tax, and where, under the Agreement, credit is not to be allowed except against sur-tax for the year, the rate shall be that ascertained by dividing the sur-tax payable by the person in question for the year by the amount of his total income for the year. | ||
(2) For the purpose of determining the said rate, the tax payable by any person for any year shall be computed without regard to any relief in respect of life assurance premiums and without any reduction thereof for any credit allowed or to be allowed under the Agreement, but shall be deemed to be reduced by any tax which, otherwise than under Rule 20 of the General Rules, the person in question is entitled to charge against any other person, and the total income of any person shall be deemed to be reduced by the amount of any income the income tax upon which that person is entitled to charge as aforesaid. | ||
(3) Where credit for Canadian tax falls to be allowed in respect of any income and any relief would, but for the provisions of this sub-paragraph, fall to be allowed in respect of that income under the provisions of section 3 of the Finance Act, 1941 (No. 14 of 1941), as amended by section 2 of the Finance Act, 1943 (No. 16 of 1943), the said relief shall not be allowed. | ||
6. Without prejudice to the provisions of the last preceding paragraph, the total credit to be allowed to a person against income tax for any year of assessment shall not exceed the total income tax payable by the person in question for that year of assessment, less any tax which, otherwise than under Rule 20 of the General Rules, that person is entitled to charge against any other person. | ||
Effect on computation of income of allowance of credit. | ||
7. (1) Subject to the provisions of this paragraph, where credit for Canadian tax falls to be allowed against any of the Irish taxes in respect of any income, no deduction for Canadian tax (whether in respect of that or any other income) shall be made in computing the amount of that income for the purposes of corporation profits tax. | ||
(2) Where the income includes a dividend and, under the Agreement, Canadian 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, for the purposes of corporation profits tax, be treated as increased by the amount of the Canadian tax not so chargeable which falls to be taken into account in computing the amount of the credit. | ||
(3) Notwithstanding anything in the preceding provisions of this paragraph, where part of the Canadian tax in respect of the income (including any such tax which, under sub-paragraph (2) of this paragraph, falls to be treated as increasing the amount of the income) cannot be allowed as a credit against any of the Irish taxes, the amount of the income shall be treated for the purposes of corporation profits tax as reduced by that part of that Canadian tax. | ||
8. (1) Where credit for Canadian tax falls to be allowed against any of the Irish taxes in respect of any income, the following provisions of this paragraph shall have effect as respects the computation, for the purposes of income tax, of the amount of that income. | ||
(2) Where the income tax payable depends on the amount received in the State, the said amount shall be treated as increased by the amount of the credit allowable against income tax. | ||
(3) Where the last preceding sub-paragraph does not apply— | ||
(a) no deduction shall be made for Canadian tax (whether in respect of the same or any other income); and | ||
(b) where the income includes a dividend and under the Agreement Canadian 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 Canadian tax not so chargeable which falls to be taken into account in computing the amount of the credit; but | ||
(c) notwithstanding anything in the preceding provisions of this sub-paragraph, where any part of the Canadian tax in respect of the income (including any such tax which, under clause (b) of this sub-paragraph, falls to be treated as increasing the amount of the income) either falls to be allowed as a credit against corporation profits tax, or cannot be allowed as a credit against any of the Irish taxes, the amount of the income shall be treated for the purposes of income tax as reduced by that part of that Canadian tax. | ||
(4) In relation to the computation of the total income of a person for the purpose of determining the rate mentioned in paragraph 5 of this Part of this Schedule, the preceding provisions of this paragraph shall have effect subject to the following modifications— | ||
(a) for the reference in sub-paragraph (2) to the amount of the credit allowable against income tax, there shall be substituted a reference to the amount of the Canadian tax in respect of the income (in the case of a dividend, Canadian tax not chargeable directly or by deduction in respect of the dividend being left out of account); and | ||
(b) clauses (b) and (c) of sub-paragraph (3) shall not apply, | ||
and subject to those modifications shall have effect in relation to all income in the case of which credit falls to be allowed for Canadian tax. | ||
Special provisions as to Dividends. | ||
9. Where, in the case of any dividend, Canadian tax not chargeable directly or by deduction in respect of the dividend is, under the Agreement, 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 Canadian tax not so chargeable which is to be taken into account shall be that borne by the body corporate paying the dividend upon the relevant profits in so far as it is properly attributable to the proportion of the relevant profits which is represented by the dividend. | ||
The relevant profits are— | ||
(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; | ||
(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: | ||
Provided that if, in a case falling under sub-paragraph (a) or sub-paragraph (c) of this paragraph, the total dividend exceeds the profits available for distribution of the period mentioned in the said sub-paragraph (a) or the said sub-paragraph (c), as the case may be, the relevant profits shall be the profits of that period plus 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 paragraph) as is equal to the excess; and for the purposes of this proviso 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. | ||
10. Where— | ||
(a) the Agreement provides, in relation to dividends of some classes, but not in relation to dividends of other classes, that Canadian tax not chargeable directly or by deduction in respect of dividends 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 dividends; and | ||
(b) a dividend is paid which is not of a class in relation to which the Agreement so provides, | ||
then, if the dividend is paid to a company which controls, directly or indirectly, not less than one half of the voting power in the company paying the dividend, credit shall be allowed as if the dividend were a dividend of a class in relation to which the Agreement so provides. | ||
Miscellaneous. | ||
11. Credit shall not be allowed under the Agreement against the Irish taxes chargeable in respect of any income of any person if the person in question elects that credit shall not be allowed in respect of that income. | ||
12. Where, under the Agreement, relief may be given either in the State or in Canada in respect of any income and it appears that the assessment to income tax or to corporation profits tax made in respect of the income 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 under the Agreement, any such additional assessments may be made as are necessary to ensure that the total amount of the income is assessed and the proper credit, if any, is given in respect thereof, and where the income is entrusted to any person in the State for payment, any such additional assessment to income tax may be made on the recipient of the income under Case VI of Schedule D. | ||
13. (1) Subject to the provisions of paragraph 14 of this Part of this Schedule, any claim for an allowance by way of credit for Canadian tax in respect of any income shall be made in writing to the inspector of taxes not later than six years from the end of the relevant year of assessment, and, if the inspector objects to any such claim, it shall be heard and determined by the Special Commissioners as if it were an appeal to them against an assessment to income tax and the provisions of the Income Tax Acts relating to the re-hearing of an appeal or the statement of a case for the opinion of the High Court on a point of law, shall, with the necessary modifications, apply accordingly. | ||
(2) In this paragraph, the expression “the relevant year of assessment” means, in relation to credit for Canadian tax in respect of any income, the year of assessment for which that income falls to be charged to income tax or would fall so to be charged if any income tax were chargeable in respect thereof. | ||
14. Where the amount of any credit given under the Agreement is rendered excessive or insufficient by reason of any adjustment of the amount of any tax payable either in the State or in Canada, nothing in the Income Tax Acts or in the enactments relating to corporation profits tax limiting the time for the making of assessments or claims for relief shall apply to any assessment or claim to which the adjustment gives rise, being an assessment or claim made not later than six years from the time when all such assessments, adjustments and other determinations have been made, as are material in determining whether any, and if so what, credit falls to be given. |