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Unilateral relief from double taxation.
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36.— (1) The Principal Act is amended—
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(a) by inserting the following section after section 826:
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“Unilateral relief from double taxation.
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826A.— Where relief from double taxation is not afforded by virtue of section 826, relief (known as ‘unilateral relief’) from tax shall be given in respect of tax paid under the laws of a territory other than the State in accordance with Schedule 24.”,
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and
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(b) in Schedule 24—
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(i) by inserting the following after paragraph 9D:
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“Unilateral Relief (branch profits)
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9DA.— (1) To the extent appearing from the following provisions of this paragraph, relief (in this paragraph referred to as ‘unilateral relief’) from corporation tax in respect of profits of a company from a trade carried on by the company through a branch or agency in a territory other than the State shall be given in respect of tax payable under the law of any territory other than the State by allowing that tax as a credit against corporation tax, notwithstanding that there are not for the time being in force any arrangements providing for such relief.
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(2) Unilateral relief shall be such relief as would fall to be given under this Schedule if arrangements with the government of the territory in question containing the provisions in subparagraphs (3) to (5) were in force, and a reference in this Schedule to credit under arrangements shall be construed as including a reference to unilateral relief.
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(3) Subject to Part 1 and to subparagraph (5), credit for tax paid under the law of a territory other than the State and computed by reference to income of a company, being a company falling within subparagraph (4), from a trade carried on by it through a branch or agency in that territory shall be allowed against corporation tax in the State computed by reference to that income.
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(4) (a) A company falls within this subparagraph if—
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(i) it is resident in the State, or
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(ii) it is, by virtue of the law of a relevant Member State other than the State, resident for the purposes of tax in such a Member State and the income referred to in subparagraph (3) forms part of the income of a branch or agency of the company in the State.
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(b) For the purposes of subparagraph (a)(ii), ‘tax’, in relation to a relevant Member State other than the State, means any tax imposed in the Member State which corresponds to corporation tax in the State.
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(5) Credit shall not be allowed by virtue of subparagraph (3)—
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(a) for tax paid under the law of a territory where there are arrangements with the government of the territory except to the extent that credit may not be given for that tax under those arrangements, or
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(b) for any tax which is relevant foreign tax within the meaning of section 449 or paragraph 9D.
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(6) Where—
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(a) unilateral relief may be given in respect of any profits, and
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(b) it appears that the assessment to corporation tax made in respect of the profits 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 by way of unilateral relief,
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then any such assessment may be made or amended as is necessary to ensure that the total amount of the profits is assessed, and the proper credit, if any, is given in respect thereof.
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(7) In this Schedule in its application to unilateral relief, references to tax payable or paid under the law of a territory outside the State include only references to taxes which are charged on income or capital gains and which correspond to corporation tax and capital gains tax.”,
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and
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(ii) by inserting the following after paragraph 9F:
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“9FA.— (1) In this paragraph—
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‘ aggregate amount of corporation tax payable by a company for an accounting period in respect of foreign branch income of the company for the accounting period ’ means so much of the corporation tax which, apart from this paragraph, would be payable by the company for that accounting period as would not have been payable had the foreign branch income been disregarded for the purposes of tax;
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‘ foreign branch ’, in relation to a company, means a branch or agency of the company in a territory other than the State through which the company carries on a trade in that territory;
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‘ foreign branch income ’, in relation to a company, means so much of the income of the company as is attributable to a foreign branch;
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‘ foreign tax ’, in relation to foreign branch income of a company, means tax which—
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(a) is paid under the laws of the territory in which the foreign branch is situated on income attributable to that branch, and
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(b) corresponds to corporation tax.
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(2) Where, as respects any foreign branch income of a company for an accounting period, any part of the foreign tax cannot, apart from this paragraph, be allowed as a credit against corporation tax and, accordingly, the amount of the income is treated under paragraph 7(3)(c) as reduced by that part of the foreign tax, then an amount equal to the aggregate of—
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(a) where income that is chargeable to tax at the rate specified in section 21(1) for the accounting period is treated under paragraph 7(3)(c) as reduced, an amount determined by the formula—
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100 — R x D
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100
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where—
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R is the rate per cent specified in section 21(1), and
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D is the amount by which that income is so treated as reduced,
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and
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(b) where income that is chargeable to tax at the rate specified in section 21A(3) for the accounting period is treated under paragraph 7(3)(c) as reduced, an amount determined by the formula—
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100 — R x D
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100
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where—
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R is the rate per cent specified in section 21A(3), and
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D is the amount by which that income is so treated as reduced,
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shall be treated for the purposes of subparagraph (3) as unrelieved foreign tax of that accounting period.
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(3) The aggregate amount of corporation tax payable by a company for an accounting period in respect of foreign branch income of the company for the accounting period shall be reduced by the unrelieved foreign tax of that accounting period.
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Unilateral Relief (capital gains)
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9FB.— (1) To the extent appearing from the following provisions of this paragraph, relief (in this paragraph referred to as ‘unilateral relief’) from capital gains tax (including corporation tax in respect of chargeable gains) in respect of chargeable gains accruing to a person on the disposal of an asset (in this paragraph referred to as a ‘specified asset’) which is located in a territory other than the State shall be given in respect of tax payable under the law of any specified territory by allowing that tax as a credit against capital gains tax (or as the case may be corporation tax in respect of chargeable gains), notwithstanding that there are not for the time being in force any arrangements providing for such relief.
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(2) Unilateral relief shall be such relief as would fall to be given under this Schedule if arrangements with the government of the specified territory in question contained the provisions in subparagraphs (3) and (4), and a reference in this Schedule to credit under arrangements shall be construed as including a reference to unilateral relief.
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(3) Subject to Part 1 and to subparagraph (5), credit for tax paid under the law of a specified territory and computed by reference to a capital gain of a person from the disposal by the person of a specified asset, shall be allowed against capital gains tax (or as the case may be corporation tax in respect of chargeable gains) in the State computed by reference to that capital gain.
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(4) Credit shall not be allowed by virtue of subparagraph (3) for tax paid under the law of a specified territory to the extent that credit may be given for that tax under—
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(a) arrangements with the government of the territory, or
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(b) any other provision of this Schedule.
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(5) Where—
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(a) unilateral relief may be given in respect of any chargeable gain, and
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(b) it appears that any assessment made in respect of the chargeable gain 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 by way of unilateral relief,
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then any such assessment may be made or amended as is necessary to ensure that the total amount of the chargeable gain is assessed, and the proper credit, if any, is given in respect thereof.
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(6) In this Schedule in its application to unilateral relief, references to tax payable or paid under the law of a territory outside the State include only references to taxes which are charged on capital gains and which correspond to income tax, corporation tax or capital gains tax.
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(7) In this paragraph ‘ specified territory ’ means any of the following territories with the government of which arrangements have been made, that is to say, the Kingdom of Belgium, Cyprus, the Republic of France, the Federal Republic of Germany, the Italian Republic, Japan, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, Pakistan or Zambia.”.
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(2) This section applies—
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(a) in the case of relief from corporation tax, as respects an accounting period ending on or after 1 January 2007, and
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(b) in any other case, for the year of assessment 2007 and subsequent years.
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