Taxes Consolidation Act 1997 section 697H

Relevant shipping income: distributions of overseas shipping companies

Section 697H sets out the conditions under which distributions received from an overseas company are treated as relevant shipping income for tonnage tax purposes.

• A dividend from an overseas company qualifies as relevant shipping income if the company operates qualifying ships, more than 50% of its voting power is held by EU-resident companies, its income would be relevant shipping income if it were a tonnage tax company, the distribution is paid from profits earned while all conditions were met and the recipient was subject to tonnage tax, and those profits are subject to tax somewhere.
• Where an overseas company pays a dividend out of profits traceable back to a distribution that itself met the qualifying conditions, that onward dividend is also deemed to meet the conditions, allowing dividends passed through a chain of companies to qualify.
• Only distributions paid out of profits arising at a time when the overseas company met all the conditions and the receiving company was a tonnage tax company can qualify; distributions referable to other periods do not.
• The close company surcharge on undistributed investment income under section 440 does not apply to overseas company dividends that constitute relevant shipping income of a tonnage tax company.