Taxes Consolidation Act 1997 section 846

Tax-free securities: exclusion of interest on borrowed money

Section 846 restricts relief for interest on money borrowed by a non-resident bank, insurance company, or securities dealer trading in Ireland through a branch or agency, where the borrowed money is used to acquire tax-free securities as defined in section 845.

• Interest on money borrowed to acquire tax-free securities is disallowed both as a deduction in computing branch profits and as a charge on income under section 243.
• The disallowed amount ("the amount ineligible for relief") is calculated by reference to all business borrowings outstanding in the accounting period, capped at the total cost of tax-free securities held in that period.
• The disallowed interest equals one year's interest at the average borrowing rate for the accounting period, or a proportionate amount where the accounting period is shorter than 12 months.
• Where a holding of tax-free securities has fluctuated during the accounting period, the cost is determined using the average acquisition cost applied to the average holding, with securities of different classes averaged separately.