Taxes Consolidation Act 1997 Schedule 24 paragraph 4

Limit on total credit - corporation tax

Paragraph 4 of Schedule 24 limits the credit for foreign tax against corporation tax to the amount of Irish corporation tax attributable to the same income, and sets out rules for calculating that attributable tax where different rates apply or where common deductions must be allocated.

• The foreign tax credit cannot exceed the Irish corporation tax properly attributable to the relevant foreign income or gain, measured according to Irish tax rules.
• Where doubly-taxed trading income arises from payments subject to foreign withholding tax, the relevant income is calculated by apportioning net trading profits on the basis of gross receipts, but foreign branch profits are excluded from this formula and are instead measured on their actual profits.
• The corporation tax attributable to the relevant income is computed at the rate applicable to that income — whether the standard rate, the 25% rate, the standard rate of income tax, or 20% — ensuring the credit limit reflects the actual Irish tax burden on that category of income.
• Where a company has deductions (such as charges on income or management expenses) that may be set against more than one type of profit, it may allocate those deductions as it thinks fit, but all deductions must be allocated; however, relevant trading charges within the meaning of section 243A are excluded from this flexible allocation.