Section 829 Treatment for double taxation relief purposes of foreign tax incentive reliefs

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(1) This section shall apply to any relief given with a view to promoting industrial, commercial, scientific, educational or other development in a territory outside the State.

When do "tax sparing" reliefs apply?

(1) Irish "tax sparing" relief applies where double tax relief is used to promote industrial, commercial, scientific, educational or other development in another country....

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(2) For the purposes of [section 826(1)]¹ and Schedule 24, any amount of tax under the law of a territory outside the State which would have been payable but for a relief to which this section applies given under that law (being a relief with respect to which provision is made in arrangements for double taxation relief which are the subject of an order under section 826(1)) shall be treated as having been payable, and references in [section 826(1)]¹ and in Schedule 24 to double taxation, tax payable or chargeable or tax not chargeable directly or by deduction shall be construed accordingly.

Amendments

1 Substituted by Finance Act 2007 section 35 and Schedule 2 para 1(ac) as on and from 2 April 2007.

What is the effect of a tax sparing clause?

(2) Where an Irish tax treaty contains a tax sparing clause, full credit is given against Irish tax for the tax that would have been payable but for the relief operated in the other country.

How does tax sparing relief operate in practice?

In practice, in order to preserve developing country tax incentives, most developed countries provide for a "tax sparing" credit to operate in many of their double tax treaties with developing countries. Where tax sparing credit is given, the investo...

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(3) The Revenue Commissioners may make regulations generally for carrying out the provisions of this section or any arrangements having the force of law under section 826 and may in particular, but without prejudice to the generality of the foregoing, provide in the regulations―

(a) for the purposes of this section or of the regulations, for the application (with or without modifications) of any provision of the Tax Acts or any regulations made under those Acts, including the provisions relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law, and

(b) that the whole or any part of a dividend paid out of profits or gains which consist of or include profits or gains in relation to which double taxation relief is given by virtue of this section is not to be regarded as income or profits for any purpose of the Tax Acts.

What regulations can Revenue make in this regard?

(3) The Revenue Commissioners may make regulations regarding the administration of tax sparing relief:...

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