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Amendment of Part 35A of Principal Act (transfer pricing)
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27. (1) Part 35A of the Principal Act is amended in section 835A—
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(a) by the substitution, in subsection (1), of the following definition for the definition of “relevant person”:
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“ ‘relevant person’ in relation to an arrangement, means a person who is within the charge to tax in respect of profits or gains or losses, the computation of which profits or gains or losses takes account of the results of the arrangement, or would take account of the results of such an arrangement;”,
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and
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(b) by the substitution of the following subsection for subsection (3):
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“(3) For the purposes of this Part, references to losses that are chargeable to tax are references to losses arising from an arrangement or relevant activities, a profit or gain arising from which would be chargeable to tax.”.
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(2) Part 35A of the Principal Act is amended by the substitution of the following section for section 835E:
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“Modification of basic rules on transfer pricing for arrangements between qualifying persons
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835E. (1) For the purposes of this Part, a ‘qualifying person’, in relation to a chargeable period, means a person who—
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(a) subject to paragraph (b)—
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(i) is a supplier in relation to an arrangement and who for that chargeable period is chargeable to income tax or corporation tax under Schedule D, other than under Case I or II of Schedule D, in respect of the profits or gains or losses arising from that arrangement, or
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(ii) is an acquirer in relation to an arrangement and who for that chargeable period is chargeable to income tax or corporation tax under Schedule D in respect of the profits or gains or losses arising from that arrangement,
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(b) is resident in the State for the purposes of income tax for that chargeable period where the supplier or the acquirer is chargeable to income tax in respect of the profits or gains or losses arising from that arrangement, and
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(c) is not a qualifying company within the meaning of section 110.
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(2) (a) For the purposes of subsection (1)(a)(i), a supplier shall, for the chargeable period, be regarded as chargeable to income tax or corporation tax under Schedule D, other than under Case I or II of Schedule D, in respect of the profits or gains or losses arising from the arrangement concerned only where the consideration receivable by the supplier under that arrangement—
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(i) is directly taken into account in computing the amount of profits or gains or losses of the supplier that are chargeable to income tax or corporation tax under Schedule D, other than under Case I or II of Schedule D, for the chargeable period, or
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(ii) would be so taken into account if any consideration were receivable by the supplier under the arrangement.
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(b) (i) For the purposes of subsection (1)(a)(ii), an acquirer shall, subject to subparagraph (ii), for the chargeable period, be regarded as chargeable to income tax or corporation tax under Schedule D, in respect of the profits or gains or losses arising from the arrangement concerned only where the consideration payable by the acquirer under that arrangement—
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(I) is directly taken into account in computing the amount of profits or gains or losses of the acquirer that are chargeable to income tax or corporation tax under Schedule D for the chargeable period, or
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(II) would be so taken into account if any consideration were payable by the acquirer under the arrangement.
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(ii) For the purposes of subsection (1)(a)(ii), in the case of an acquirer to whom subparagraph (i) does not apply, the acquirer shall, for the chargeable period, be regarded as chargeable to—
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(I) income tax under Schedule D in respect of the profits or gains or losses arising from the arrangement concerned where any profits or gains or losses of the acquirer arising directly or indirectly from the relevant activities of the acquirer are or, if there were any such profits or gains or losses, would be, chargeable to income tax under Schedule D for the chargeable period, or
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(II) corporation tax under Schedule D, in respect of the profits or gains or losses arising from the arrangement concerned, where any profits or gains or losses of the acquirer arising directly or indirectly from the relevant activities of the acquirer are or, if there were any such profits or gains or losses, would be, chargeable to corporation tax under Schedule D for the chargeable period, or would be chargeable to corporation tax but for section 129, and the acquirer is resident in the State for the chargeable period.
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(3) Subject to subsections (6) to (8), where—
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(a) a supplier or an acquirer, in relation to an arrangement, is chargeable to tax for a chargeable period, under Schedule D, other than under Case I or II of Schedule D, in respect of the profits or gains or losses arising from that arrangement (in this section referred to as the ‘eligible person’), and
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(b) the supplier and the acquirer are both qualifying persons, in relation to that arrangement, for the chargeable period of the eligible person,
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then, section 835C shall not apply in computing the amount of profits or gains or losses arising to the eligible person from the arrangement for the chargeable period.
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(4) For the purposes of subsection (3)(a)—
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(a) a supplier shall, for the chargeable period, be regarded as chargeable to income tax or corporation tax under Schedule D, other than under Case I or II of Schedule D, in respect of profits or gains or losses arising from the arrangement concerned only where the consideration receivable by the supplier under that arrangement—
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(i) is directly taken into account in computing the amount of profits or gains or losses of the supplier that are chargeable to income tax or corporation tax under Schedule D, other than under Case I or II of Schedule D, for the chargeable period, or
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(ii) would be so taken into account if any consideration were receivable by the supplier under the arrangement,
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and
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(b) an acquirer shall, for the chargeable period, be regarded as chargeable to income tax or corporation tax under Schedule D, other than under Case I or II of Schedule D, in respect of profits or gains or losses arising from the arrangement concerned only where the consideration payable under that arrangement—
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(i) is directly taken into account in computing the amount of profits or gains or losses of the acquirer that are chargeable to income tax or corporation tax under Schedule D, other than under Case I or II of Schedule D, for the chargeable period, or
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(ii) would be so taken into account if any consideration were payable by the acquirer under the arrangement.
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(5) For the purposes of subsection (3)(b)—
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(a) where the supplier is the eligible person, the acquirer shall be a qualifying person only where the acquirer is a qualifying person for the duration of the chargeable period of the supplier, and
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(b) where the acquirer is the eligible person, the supplier shall be a qualifying person only where the supplier is a qualifying person for the duration of the chargeable period of the acquirer.
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(6) (a) Subsection (3) shall only apply to an arrangement where the arrangement is entered into for bona fide commercial reasons.
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(b) Subsection (3) shall not apply to an arrangement where the main purpose, or one of the main purposes, of the arrangement is the avoidance of tax.
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(7) (a) Subsection (3) shall not apply in the case of an arrangement, where, due to the existence of the arrangement, an amount, which is greater than the actual consideration payable by the acquirer under the arrangement, may—
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(i) be taken into account as an expenditure or expense,
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(ii) be taken into account in determining allowances for capital expenditure which may be made, or
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(iii) otherwise be deducted, allowed or relieved,
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in computing the profits or gains, of the acquirer, on which tax falls finally to be borne for the purposes of domestic tax or foreign tax.
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(b) For the purpose of this subsection, ‘domestic tax’ and ‘foreign tax’ have the same meaning as in section 835Z(1).
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(8) (a) Subsection (3) shall not apply in the case of an arrangement involving a supplier and an acquirer who are qualifying persons (in this subsection referred to as the ‘first-mentioned arrangement’) which is made as part of, or in connection with, any scheme involving the acquirer in relation to the first-mentioned arrangement, or a person associated with the acquirer, entering into an arrangement with a person or persons who are not qualifying persons (in this subsection referred to as the ‘second-mentioned arrangement’) and the sole or main purpose of the first-mentioned arrangement is to directly or indirectly obtain a tax advantage in connection with the second-mentioned arrangement.
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(b) For the purpose of this subsection, ‘tax advantage’ has the same meaning as in section 811C(1).
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(9) A qualifying person shall maintain and have available such records as may reasonably be required for the purposes of determining whether the requirements of this section are met.”.
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(3) Part 35A of the Principal Act is amended—
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(a) by the substitution, in section 835F(5)(a)(i), of “qualifying person” for “qualifying relevant person”, and
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(b) by the substitution, in section 835G(4), of “qualifying person” for “qualifying relevant person”.
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(4) Subsections (1) to (3) shall apply for chargeable periods (within the meaning of section 321(2) of the Principal Act) commencing on or after 1 January 2022.
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(5) Section 15 of the Finance Act 2020 is repealed.
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