Taxes Consolidation Act 1997 section 829

Treatment for double taxation relief purposes of foreign tax incentive reliefs

Section 829 provides for "tax sparing" relief, under which foreign tax forgone under a developing country's incentive regime is treated as having been paid for the purposes of double taxation relief.

• Tax sparing applies where a foreign country offers a tax incentive (such as a reduced rate or tax holiday) to promote industrial, commercial, scientific, educational or other development, and a double taxation agreement with Ireland includes a tax sparing clause.
• Where tax sparing applies, the foreign tax that would have been payable but for the incentive relief is treated as having been paid, so that full credit is given against Irish tax for the tax forgone by the other country.
• Without tax sparing, the benefit of the foreign incentive would be nullified under the credit method, because the Irish tax charge would simply absorb the tax saving granted by the developing country.
• The Revenue Commissioners may make regulations to administer tax sparing relief, including applying income tax provisions and providing that dividends paid from tax-spared profits are not treated as income or profits for tax purposes. No such regulations have been made.