Transcript www.charteredaccountants.ie

Chartered
Tax
Consultant
Applied Tax
Module 5
Corporation Tax
Michael Smith
22nd & 23rd February
and 1st March 2013
www.charteredaccountants.ie
EDUCATING
SUPPORTING
REPRESENTING
Learning Objectives
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Scope of Irish Corporation Tax
Resident and Non Resident Companies
CT Framework – Rates and APs
CT computations and 9 Principles
CT Compliance – Tax Return filing,
payments and assessments
Introduction and Overview
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CT legislation
Income Tax and CGT Rules
Irish CT policy and 12.5% rate
Strict rules and tax law apply
Step by step analysis of CT computation
Scope of CT
• Resident Cos
• CT on Worldwide
Income
• Non Res Cos Trading • CT on Irish trading
income
in Ireland
• Non Res Cos not
trading in Ireland
• No CT – IT on Irish
source/CGT on SA
Company Residence
• Case Law
– Central Management and Control
• Irish Tax Law
– S.23A(2) TCA 97 – general rule Irish incorporation
– S.23A(3) and (4) TCA 97 – Trading and Treaty
exemptions
• Double Tax Agreements (CTC Integrated Tax)
Central Mgt and Control
• Case law established this basic concept
• UK cases – De Beers Consolidated Gold
Mines v Howe (5TC 198)
• A co is resident “where the central
management and control actually abides”
• Step 1 – Determine location of central mgt
and control (CMC)
Where is CMC located?
• Review corporate governance processes
– Who decides on high level strategy?
– Where are these decisions taken?
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Where are books and records kept?
Where are accounts audited?
Where are profits realised?
Location of bank accounts?
Case Law Tests
LOCATION OF MEETINGS AND COMPANY
RECORDS?
Directors’ Meetings
Books of account
Shareholders’ Meetings
Accounts prepared and
examined
Statutory Books and Company Seal
Accounts audited
Negotiation of major contracts
Dividends declared
Matters of important policy
determined
Profits realised
Majority of directors resident
Bank account
Head Office
Company Residence
• No single factor determines residence
• Combination of tests used to establish
CMC
• Company not incorporated in Ireland?
Residence determined by location of CMC
Residence – Irish Incorporation
• S.23A TCA 97
• S.23A(2) TCA 97 – Irish incorporated
companies are Irish resident
• S.23B TCA 97
– Societas Europaea (SE) and European
Cooperative Society (SCE) with registered
office in Ireland
– Treated as resident in Ireland
Incorporation Test
• E Ltd incorporated in
•
Ireland
• Carries on business in •
Isle of Man
•
• Majority of directors
resident in IOM
•
• Board Meetings in IOM •
Irish-director attends
• All decisions made in IOM
Where is management
and control exercised?
Isle of Man
Where is company
resident?
Ireland – S.23A TCA 97
No Treaty/Trading
exemption
Incorporation Rule Exceptions
• Treaty Exception
• Place of incorporation rule does not apply
where the company is resident in a Treaty
country
• S.23A(4) TCA 97 – DTA tie breaker clause
holds
• Co generally resident where CMC is
located
Incorporation Rule Exceptions
• Treaty Exception example
• Beckett Solutions Ltd is incorporated in
Ireland
• The co is also resident in France under
French law
• Tie-breaker clause in Irish/France DTA
treats BSL as resident in France
• S.23A(4) TCA 97 – BSL resident in
France
Trading Exception
• S.23A(3) TCA 97
• “Relevant Company”
• Does company (or related* co) carry on a
trade in Ireland?
– Is the company under ultimate control of >50%
residents of an EU/DTA country? Or
– Quoted on SE (or in >50% relationship* with
QSE Co) in EU/DTA country?
*related = 50% group with real and substantial
relationship
Trading Exception
• Where S.23A(3) TCA 97 applies:
– Irish incorporation test does not apply
– Company is resident under central
management and control test
Trading Exception
• S.23A(3) TCA 97
• Applies where the company is a “relevant
company”
• Relevant Company = Co (or related co)
carrying on a trade in Ireland which is:
– Under the ultimate control of EU/DTA residents
or
– Quoted* on recognised SE in EU/DTA country
* Or in 50% relationship with quoted company
Trading Exception -1
• Micro Ltd Irish
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incorporated Co
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• 1 Irish & 2 Bermuda dirs
• All board meetings in Ber •
• Micro’s trade in Bermuda
• 60% Micro owned by
Macro – quoted on ISE
• Micro owns 55% Mega, •
•
an Irish trading co
Relevant Co?
Yes – owned by
>50% EU listed co
Trading condition met
as Mega is >50%
owned and trading in
Ireland
CMC test applies
Micro is resident in
Bermuda
Trading Exception -2
• Avoir Ltd is Irish
incorporated
• Carrying on a trade in
Argentina
• CMC is in Argentina
• Avoir owns 62% of
Irish resident co
• Avoir is owned by 4
French individuals
resident in France
• Is Avoir a “relevant
co”?
• Yes - >50% controlled
by EU residents and
• Meets trading
condition with 62%
sub
• Avoir resident in
Argentina – CMC
rule
Trading Exception -3
• Éire Ltd is Irish
incorporated
• Carries on a trade in
Kenya
• Owned by a UK res co
• UK co by 2 individuals
resident in Kenya
• Éire owns 82% in an
Irish trading company
• Where is ultimate
ownership?
• Kenya – not EU/DTA
• Trading test is met but
Éire is not a “relevant
co”
• S.23A(2) applies
• CMC displaced
• Éire is resident in
Ireland
Trading Exception -4
• Anois Ltd is
incorporated in Ireland
• 2 Irish resident
individuals own 100%
of Anois
• Anois carries on its
trade in Argentina
• Anois is managed and
controlled exclusively
in Argentina
• Is Anois a “relevant
co”?
• No - the company
does not carry on a
trade in Ireland
• S.23A(2) treats Anois
as resident in
Ireland
Non Resident Companies
• S.25 TCA 97
• No CT liability unless the non res co
trades in Ireland through a branch/agency
• S.4 TCA 97 defines branch or agency
• “any factorship, agency, receivership,
branch or management”
• Non trading Irish branch – Income Tax
• Non trading Irish branch – CGT on SA
Scope of Charge Irish Branch
Company resident in US
with Dublin Branch
Trading Profits Dublin Branch
Irish Branch
Deposit accounts in Dublin
and New York
Rental income from UK
property purchased from
branch profits
US co Galway Rental property
Irish CT - int and n/a
for curr gains
Irish CT - income n/a
and gains
Irish CT
No charge
US Head
Office
n/a
Irish IT on
rents
Irish CGT
on gain
Non Resident Companies
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Start CT comp with Irish branch accounts
Include investment assets of branch
Include income from assets
Assets held outside Ireland
– Has Irish branch made the investment? or
– Has Head Office made investment?
– S Murphy v Dataproducts (ITR Vol IV p 12)
How is CT computed?
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Legal Framework
CT Rates
Trading v Passive Income
Accounting Periods
From Financial Statements
CT comps
Legal Framework
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S.26 TCA 97
S.26(1) – CT is on worldwide profits
S.27(1) – Arising basis
S.26(2) – Special situations
– Where co is a beneficiary under a trust
– Where co is a partner in a partnership
– Winding up of company – in liquidation
Legal Framework
• S.26(3) TCA 97
• CT charged for each calendar year
• Assessments made for Accounting
Periods
• S.27 TCA 97 – rules for APs
• CT assessment is apportioned between
relevant calendar years where CT rate
changes
CT Rates
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CT Rate set in Budget
CT introduced in 1977
CT Rate 1982-88 – 50%
S.21(1) TCA 97: - 2003 to date 12.5%
(standard rate)
• S.21(2) TCA 97 dis-applies IT to Irish res
cos liable to CT
• Non res cos liable to CT on branch profits
CT Rates
• S.21A TCA 97 higher CT rate of 25% on
passive income: Sch D Case III, IV and V
• S.21A(4) – 25% rate not applicable to
Case I interest of certain insurance cos
• S.21A(3) – 25% rate on income of an
“excepted trade”
– Dealing in or developing land – S.639-647
– Working minerals, turn and peat
– Petroleum activities
CT Rate – Mixed activities
• Apportionment of
receipts and
expenses
• Just and reasonable
basis
• Net income taxed @
12.5%/25%
• Builder buys land –
trading stock
• Builds on part of land
• Profits on sale of
building @12.5%
• Profit on sale of
undeveloped land @
25%
CT Rates Summary
Nature of Income
• Point Trade
1
Excepted
•
Point
2
Case I and II Trades
• Point 3
Case III Trades
• Point 4
Case
III For
• Point
5 Divs
• Point
Case
IV, V6
Chargeable Gains (as adjusted)
12.5%
25%
X
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X
X
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X
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X
Trading v Passive Income
• Trading operation v passive income
• Revenue focus on “low substance”
business – “brass plate” operations
• No definition of “trading” in Direct Tax Acts
• Case Law
• Badges of Trade
• Revenue Guidance
Court Cases
• Examine specific facts of case
• Is there an existence of common
characteristics of trade?
• Noddy Subsidiary Rights v IRC 43 TC 458
• Noddy Ltd found actively engaged in trade
of intellectual property rights
• Staff exercised skill/sought customers
/made contracts
Badges of Trade
Subject Matter of
Realisation
Commodities/Manufactured
Items normally = trading
Length of period of ownership
Trading usually short
Frequency of transaction
Similar transaction at same
time or in succession =
presumption of trading
Article more marketable?
Advertising? Marketing?
Trading v investment status?
Supplementary Work
Circumstances of realisation
Motive
Never irrelevant – intention of
seller
Revenue Guidance
• Tax Briefing 57
• Revenue Statement of Practice on
Classification of Activities as Trading
• Revenue prior ruling can be sought
• Foreign companies coming to Ireland
• Decisions published on “Opinions on the
Classification of Activities as Trading”
Revenue Guidance
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Factors considered by Revenue
Commercial Rationale
Real value added
Employees in Ireland with skills needed to
carry out trade
Accounting Periods
• Concept of AP is fundamental to CT
• APs drive the CT compliance cycle
• Computations, Returns, Assessments,
Tax Payments
• S.27 TCA 97 deals with APs
• Commencement and cessation of APs
• Relationship of AP with Financial
Statements
Commencement of AP
S.27(2)(a) Co acquires a Source of
Income
Placing shareholder funds
on deposit. Date account
opened
S.27(2)(a) Co becomes Resident in Ireland
CMC changed to Ireland –
date of board meeting
S.27(2)(a) Res Co commences to carry on a
/S.27(4)
business
Dormant co receives
subscription for shares and
buys land for manufacturing
trade
S.27(2)(a) Legislative event
New liability or repeal of
exemption
S.27(2)(b) Cessation of another AP while co
remains chargeable to CT
First day of AP normally day
after AP ends
S.27(7)
Member’s passing of windingup resolution
Appt of liquidator and 12 months
intervals thereafter
Cessation of AP
S.27(3)(a)
End of 12 months from beginning of AP
S.27(3)(b)
S.27(3)(b)
S.27(3)(c)
Accounting date of company
End of a period for which no accounts prepared
Commencement of trading
S.27(3)(c)
Cessation of trading
S.27(3)(c)
Trade comes within charge to CT
S.27(3)(d)
Commencement of residence in Ireland
S.27(3)(d)
Cessation of residence in Ireland
S.27(3)(e)
Co ceases to be within charge to CT
S.27(7)
Appointment of liquidator and intervals of 12 mths
Accounting Periods
• S.27(5) – Rules for cases where different
accounting dates used for different trades
– Highly unusual situation
• S.27(6) – Where chargeable gains/losses
arise outside an AP
• S.27(8) – Co can appeal Revenue’s
estimate of an AP
Financial Statements to CT Comp
• FS are foundations of CT comp
• Adjustments needed to arrive at CT
liability
• CT comp determines tax charge for FS
• Review of FS
• Tax payable for AP/Opening
Balance/Payments
• P/L Tax Charge and Bal Sheet Liability
Financial Statements to CT Comp
• Why is a consistent methodology
needed?
• Serves as a checklist
• Material items not omitted
• Computation prepared in correct order
• Control procedure for review
Corporation Tax Computation
1. Is Co or Branch trading? Yes (If No, see
8)
2. Adjust PBT to exclude
–
–
–
–
Irish dividends
Income chargeable under other
Cases/Schedules
Chargeable Gains
“Tax Nothings”
Corporation Tax Computation
3. Prepare adjusted Case I/II comp for
each trade
4. Compute CA and deduct from Case I/II
of each trade
5. Is the trade taxable at 12.5%? Yes (If
No, see number 8)
6. Deduct losses forward from prior years
from income of each related trade
Corporation Tax Computation
7. Aggregate the profits of each trade
Add other amounts liable @12.5% (Case IIIforeign dividends)
Deduct:
Relevant trading losses
Relevant trading charges
Corporation Tax Computation
8. Add following amounts
- Income chargeable under Case III, IV,V
- Trading income @ 25%, net of losses fwd
Note: Includes income where No. 1 and No.
5 answer was “No”
Corporation Tax Computation
9. Add adjusted chargeable gains
10. Deduct the following, in order, from total
profits
- Current year losses
- Non trade charges
- Group Relief
- Loss Relief carried back
11. Compute CT @ 12.5% and 25%
Corporation Tax Computation
12. Deduct the following, in order, from
corporation tax
- Value based charges
- Value based losses
13. Compute Close Co surcharges
14. Deduct CT credits
15. Add/deduct net IT
Corporation Tax Principles
1
Irish Divs received and divs/distributions made
2
Income Tax Principles apply to CT
3
Capital Allowances and CT
4
Chargeable Gains and CT
5
Charges on Income
6
Tax nothings – tax adjustments
7
Income tax borne by deduction
8
Losses
9
Deduction for CT Credits
CT P1 Irish dividends
Received
• Sch F applies to individuals but not to
companies
• S.129 TCA 97 – exemption from CT for
dividends from another Irish company and
for amounts treated as a distribution by
Chapter 2, Part 6 TCA 1997
CT P1 Irish dividends
Paid
• S.76(5)(a)TCA 97
• Dividends and distributions are not
deductible
• S.130(2)(d)(iv) TCA 97 interest to a parent
co resident in a tax haven is a distribution
• No deduction for interest within
S.130(2)(d)(iv) TCA 1997
Irish Dividends
• S.156 TCA 1997
• Franked Investment Income (FII)
• Symmetrical treatment – div paid not
deductible and div received not taxable
CT P2 IT Principles Apply
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S.76 TCA 97 – Application of IT principles
Co based on APs = IT based on Years of Asst
Income exempt from IT also exempt from CT
Schedules C, D, E and F
Know difference between “profit before tax”
and “Tax adjusted profit”
• Additional/modified rules for CT
GAAP v IFRS
• S.76A TCA 97 allows IFRS or GAAP
• S.17A TCA 97 – Rules for transition from
GAAP to IFRS
• Group members may not “mix” GAAP and
IFRS for tax advantage
• S.76C(2) TCA 97 – GAAP used for tax
purposes where groups prepare accounts
using GAAP and IFRS
Case 1 and 11
• “Realisation principle” - Case Law
• Tax only arises when Profit realised
• S.76B TCA 97 over rides “realisation
principle” where IAS 39 used
• “Fair Value” accounting includes unrealised
profits and losses under IAS 39
• No adjustment to PBT
Interest and R&D Capitalised
• IFRS/GAAP – certain expenses
capitalised as cost of asset in balance
sheet
• S.81(3) TCA 97 exception to general rule
• Expenses capitalised relating to R&D and
interest are tax deductible
• Amount deductible = amount capitalised
• Adjustment to CA comp and DT comp
Exchange Differences
• Financial Statements – functional
currency
• S.79 TCA 97 – tax treatment of exchange
differences for trading companies
• S.79(2) - Gains/Losses on Relevant
Monetary Items and Hedging contracts
are trading items for tax purposes
Exchange Differences
• S.79(3) TCA 97
• FX element of realised and unrealised
gains/losses
• Representing money held or hedging
contracts
• Excluded from CGT as taxed as income
under S.79(2) TCA 97
Exchange Differences
• FX for non-trading companies must be
analysed from first principles
• IT/CGT can arise for fully matched
positions
Exchange Translation
• Trading companies where € is not
functional currency
• Translate FC tax liability @ average FX
rate for AP
• Non trading companies – translate each
non-trading income/gain at actual FX Rate
to compute € tax liability
Hedge Contracts
• € tax liability fixed in company’s functional
currency by hedging
• FX transaction
• Forward purchase of € for fixed amount
• Hedge contract is an asset for CGT
• S.79(4) TCA 97 – CGT “ignored”
• “Effective for tax purposes”
• Matching of tax liability FX with hedging
cancel each other
What expenditure is deductible ?
Income Tax principles
Revenue v Capital
Pre-Trading Expenditure
Superannuation pension
Schemes
Employer Contributions to
Revenue Approved
Occupational Pension
Schemes/PRSA
Registration of Trade Marks
S.82 TCA 97
S.84 TCA 97
Long Term Unemployed
double deduction
S.88A TCA 97
S.774(6)(b) TCA 97
S.787(2) TCA 97
Paid Basis
S.86 TCA 97
What expenditure is deductible ?
Repairs to Capital Assets
Scientific Research
Research not related to cos
trade – R&D cost sharing
agreements
Know-how expenditure
S.81(2)(d) TCA 97 Improvements and
replacements NOT
deductible
S.764 TCA 97
S.764(2) TCA 97
S.768 TCA 97
Non Deductible Expenditure
Amounts not “wholly and
exclusively” incurred
S.81 TCA 97
Capital employed in the trade or
profession
S.81(2)(f) TCA 97
Interest on late payment of tax
e.g. VAT, CT, PAYE/PRSI
S.1080(3) TCA 97
Expenditure involving crime
S.83A TCA 97
Business Entertainment
S.840 TCA 97
(Staff entertainment is allowable)
Trade Interest Paid
• Interest allowable on an accruals basis
• S.817C TCA 97 - interest paid to a
connected person if connected person is
taxable on the interest as trading income
(Bank, Finance Co etc)
• Interest deduction on amount taxable on
recipient
• S.817C not applicable to interest paid to non
resident cos not under control of Irish
residents
Case III Trades
• S.18(2)(f) TCA 97 – foreign trades taxed
under Sch D Case III
• S.77(5) TCA 97 applies Case I rules
• Foreign Trade - Taxable @ 25%
• Highly unusual for trade to be carried on
entirely outside Ireland
• Case I trading activity needed for “trading
exception” for incorporation residence rule
Case III Foreign Dividends
• S.77(6) TCA 97 – deduction for foreign tax
• Foreign divs taxable under Case III
• S.21B TCA 97 - modifies 25% rate in
S.21A TCA 97
• ECJ Case - FII Group Litigation Order
(GLO)(C446/04)
• Freedom of Establishment principle of EC
Treaty applies
Case III Foreign Dividends
• Cannot discriminate between tax on domestic
and foreign dividends
• S.21B(5) TCA 97 – 12.5% rate on divs paid out
of trading profits
– Co res in EU/DTA/OECD country for period of
div
– Public quoted cos (+75% sub) in Irl/EU/DTA
• Election made by Irish recipient co
• Trade undertaken in branch of EU/DTA/OECD
co
Case III Dividends
• ≤ 5% shareholding = portfolio holding
• Divs taxable at 12.5% (trade and non trade
income)
• > 5% shareholding – apportionment needed
between trading and non trading income
• Where ≥ 75% profits of paying co are
trading and ≥ 75% of assets of receiving co
are trading assets
•  divs = trading income divs  12.5%
For Divs Example A Ltd
Sub
%
Owned
•
B Ltd
C Ltd
•
D Ltd
•
E Ltd
•
F Ltd
•
•
G Ltd
Point
1
100%
100%2
Point
100%
Point
3
100%
Point 4
100%5
Point
Point
6
100%
H Ltd
3%
Residence
Income
Rate of tax
on div
UK
Rents in UK
25%
Jersey
Shop in French Branch
25%
France
Shop in Jersey Branch
12.5%
German
Manufacturing and Bank
interest
Manufacturing and Bank
interest
12.5%/25%
Brazil
Trade in Brazil
12.5%
US
Rents New York
12.5%
France
12.5%
Case IV and V
• No special rules for CT computation
• Income tax principles apply
• CT calculations done using IT rules
CT P3 Capital Allowances
• S.307 TCA 97 – Case I CAs/Balancing
Charges are treated as an expense or
receipts of trade
• Income chargeable to CT is net of CA
• S.308(1) /(2) TCA 97 – CA/BC from other
sources treated as deductible/taxable
from that source
CT P3 Capital Allowances
• Excess non-trade capital allowances
• Set against total profits of the current
period
• Carried back against total profits of prior
period of same length
• Carried forward against same source
(Case IV/V)
Green Capital Allowances
•
•
•
•
•
Qualify for accelerated CAs
S.285A/ Sch 4A TCA 97
100% of cost allowed in first year
Sustainable Energy Ireland – full list
10 Categories:
Motors and Drivers Lighting/Controls
BEMS
Information &
Communication
Heating and
Technology
Alternative fuel
vehicles – electric
Refrigeration and
cooling systems
HVAC systems
Electro mechanical systems
Catering and hospitality machinery
IP and Intangible Assets
• Historic situation – limited deductions for
expenditure on IP
• Expenditure on Specified Intangible
Assets
• S.291A TCA 97 extends definition of plant
in S.288 TCA 97 to include SIAs
SIAs
Patents/Registered designs
Trademarks/Brand names
Domain names/copyrights/service marks/publishing
titles
Applications for grant or registration of above
Know-how
Authorisation to sell medicines, product of designs,
formula, process or invention
Computer software for commercial application
Goodwill relating to SIAs
SIAs
• Relief applies to pre trading expenditure
Deduction against
• income generated from exploiting SIA
• income from sale of goods/services
deriving greater part of value from SIAs
• Company can opt to claim IP deduction on
– Matching CA with depreciation per accounts or
– Over 15 years – 7% for 14 yrs + 2% in yr 15
SIAs
• Accounts based allowance includes
impairment charge under GAAPs
• 80% Relevant Profits restriction
• Restriction includes funding costs
• Carry forward of excess allowance
against IP related profits
SIAs
• Anti avoidance – connected parties and
bona fide transactions
• No CGT “group relief” where acquirer
claiming IP relief
• Possible BC if sold within 10 years
Patents – old regime
•
•
•
•
•
S.755 TCA 97
CA on purchase of patent rights
17 year write off period or remaining life
Expenditure incurred for trade purposes or
On acquiring patents rights for licensing
– Case IV with CA
• S.291A TCA 97 from 7th May 2011
Patents & Know How
• Pre and Post 7th May 2011 regimes
• Choice for taxpayer
• Post 7th May 2011
– CA claim under S.291A TCA 97
CT P4 Chargeable Gains
• Income + Gains = Total Profits
• S.76(3) TCA 97
• S.21(3) TCA 97 Irish res cos not liable to
CGT – exceptions
• S.649 TCA 97 – CGT on development
land gains
• Non dev land gains chargeable to CT
• Effective rate = CGT liability
CT P4 Chargeable Gains
• S.78 TCA 97 – conversion mechanism
• Calculate capital gain/loss on each
disposal in the AP
• Arrive at chargeable gain, net of losses
• Net gain included in CT computation is an
amount, if taxed @ 12.5%, would produce
same result as CGT computation
• S.78(3)(b) TCA 97 – rules for rate
changes in AP
CT P4 Chargeable Gains
•
•
•
•
•
•
•
•
1/1/2011-6/12/2011 (339 days) 25%
7/12/2011-31/12/2011 (268 days)30%
CGT Rate-S 78(3)(b) TCA 97:
25% x (339/365) =
23.22%
30% x (26/365) =
2.14%
CGT Rate 2011
25.36%
25.36% applies to all gains in 2011
Contrast with individuals
CT P4 Chargeable Gains
Gain on Building
€120,000
Loss on Land
(€30,000)
Net Gain
€90,000
Capital Loss b/fwd
(€10,000)
Chargeable to tax
€80,000
Include in computation
€80k x 30%/12.5%
CT @12.5%
€192,000
€24,000
CT P5 Charges on Income
• “Pure Income” receipts
• No expenses incurred in generation of
income
• Patent Royalty
• Acquisition interest – on non trading loan
where loan is capable of lasting >1 year
• Annuities and other annual payments
CT P5 Charges on Income
• S.76(5)(b) TCA 97 – no deduction against
taxable income
• S.243 TCA 97 – deduction allowed in year
in which payment made
• Note – interest on funds borrowed for
trading or purchase of rental property are
not a charge on income and are
deductible under Case I/V rules
CT P5 Charges on Income
• S.243(4)-(9) TCA 97 define “charges” to
include
• Yearly Interest eligible for relief under
S.247 TCA 97 (purchase of shares in
another co)
• Other S.247 interest
• Annuities/annual payments
• Patent Royalty expenditure – not capital
CT P5 Charges on Income
• S.243 TCA 97 excludes from charges
• Dividends and distributions
• Amounts deductible in calculating CT
Profits (Case I interest, Case V interest)
• Payments charged to capital
• Payments not made for valuable and
sufficient consideration
• Payment not ultimately borne by the co
Charges on Income
• Two categories
• Relevant trade charges – paid wholly and
exclusively for 12.5% taxed trading
purposes
• Non-trade charges
Relevant Trade Charges
• Patent Royalties and Annual Payments
• S.243(3) TCA 97 - Pre-trading trade charges
treated as paid on date trade commences
• S.243A(3)TCA 97 – trade charges deductible
against
– Income from trades @ 12.5%
– S.21B TCA 97 dividends taxable @ 12.5%
– Trading income from reinsurance
Relevant Trade Charges
• S.243B TCA 97 – relief for “Value Based
Relief”
• Tax value of trading charges exceeding
12.5% trading income reduces CT payable
• No deduction for trading charges against
25% income
• Excess charge value = 12.5% tax equivalent
• Unutilised charges carried fwd as S.396 TCA
97 trade losses
Non-Trade Charges
• Charges not wholly and exclusively
incurred for trade taxable at 12.5%
• Patent Royalties for Case IV source
• Patent Royalties paid for 25% tax mining
trade
• S.247 TCA 97 acquisition interest
Non-Trade Charges
• S.243(2)TCA 97 – deductible against total
profits
• Deduct after all other reliefs but before
group loss relief
• Choice - against 12.5% or 25% items
• Gains are grossed up @12.5%
• Excess non-trade charges lost if not
claimed by co or group co
Acquisition Interest
• S.247 TCA 97 – “protected” or
“acquisition” interest
• Loans taken out to invest in/lend to
another company
• Legislation is very complex
• Many anti-avoidance provisions
Acquisition Interest
1. Funds applied in acquiring ord shares of
or lending to:
• Trading company
• Rental company
• Holding co of trading company
• Wholly or mainly test
Acquisition Interest
2. Refinancing loans qualify to extent of
the amount of original loan
3. Investing company must hold >5%
interest after S.247 transaction
4. ≥ 1 common director throughout loan
5. S.254 Recovery of Capital provisions
-
Sale of shares and repayment of loan
Receipt of divs/income allowed
Acquisition Interest
•
•
•
•
•
FA 2011 – significant changes
Loans taken out on or after 21st January
2011
Certain interest excluded from qualifying as
a charge
Similar to intra group borrowing restrictions
Detailed provisions affecting group
financing structures involving non resident
members.
CT P6 “Tax Nothings”
• Valid debits/credits in Financial
Statements
• Not deductible or taxable for CT purposes
• PBT must be adjusted
• Add back of deduct items
• No deferred tax if “permanent differences”
CT P 6 “Tax Nothings”
Debits in P&L not
deductible for tax
Entertainment
Expenses
Impairment Provisions
Credits in P&L not taxable
Dividends from Irish
companies
Profits from Fair Value
adjustment in non trading
cos
Loss on liabilities in non Profits on liabilities in non
trading co
trading co
Divs and payments
treated as divs
CT P7 Income Tax at source
• Withholding tax applies to wide range of
transactions
• Receipts – tax computation
• S.24(2) TCA 97 – IT deducted set off
against CT for the AP in which income is
assessable
• IT refundable only if no CT for AP
• Accounting treatment = tax treatment
CT P7 Income Tax at source
Liable to Income Tax @ source Exceptions for annual
Interest paid
DIRT Interest @ 30%
S.246(3)(a) TCA 97
Bank/building soc interest
Professional Services PSWT
S.246(3)(h) TCA 97
exemption if DTA resident
S.264(2) TCA 97 annual interest S.246(3)(g) TCA 97 (non bank) Withholding tax @
Interest treated as a distrib
20%
under S.437 TCA 97
S.268 TCA 97 Charges - Patent
S.246(3)(bb) and S 246(5)
Royalties/annuities/annual
TCA 97 Interest treated as
payment Withholding tax @ 20% trading e.g. Treasury SPC
CT P7 Income Tax at source
•
•
•
•
Treatment of payment in CT computation
S.246(2) TCA 97 - annual interest
S.238 TCA 97 - patent royalties, annuities
S.239 TCA 97 - Rules for resident cos to
pay IT
• S.241 TCA 97 - Rules for non resident cos
• CT Tax Return to show details
CT P7 Income Tax at source
• Option to net payments recd and made
S.239(7) TCA 97
• IT treated as CT for payment
Group Payments – Withholding Tax
• S.410 TCA 97
• 51% Group
• Direct or indirect
ownership
• S.9(5) –(10) TCA 97
• Rules to calculate
lower tier companies
Owner
Payer Recipient
Group -Payments
• S.410(3) TCA 97 – 51% group conditions
• Both companies Irish resident or resident
in EU/EEA with DTA (Iceland and Norway)
• Where ownership is indirect all companies
in chain must be resident in EU, Iceland
or Norway
• Indirect ownership – shares in lower co ≠
share dealing co
Consortium -Payments
• *Other Shareholders
• HC must own 90%
Trading Co
• ≥75% shares in
HC/TC owned by ≤ 5
EEA Res Cos
Each holds ≥ 5%
Up to 5 consortium
Members
25%*
Holding Co
Trading Co
Group -Payments
• S.410(4) TCA 97 – no need to deduct IT
on:
• Payments within group/consortium regime
that are:
– Charges on income of interest of paying co
– And taxable in country of residence where non
resident recipient is resident
– Recipient co cannot hold shares as trading
stock
Group -Payments
• S.891 TCA 97 – Returns to Revenue
• S.891A TCA 97 – Return of interest paid
gross by virtue S.246(3)(h) must also be
filed
CT P8 Losses
•
•
•
•
Chapter 3 Part 12 TCA 97
S.396 - S.401 TCA 97
Trading Losses
Other Losses
CT P8 Losses Case IV
•
•
•
•
•
Case IV
- offset against other Case IV of same AP
- carry forward excess against Case IV
- no claim
- mandatory
CT P8 Losses Case V
• S.399(2)(a) TCA 97 net surplus/deficiency
• Net deficiency – claim to set against Case
V of prior period of equal length
• Apportionment needed if prior AP not =
length of current AP
• S.384 TCA 97 Case V losses forward set
against profits of first available year
• CA (S.305(1)(a)) TCA 97 claimed in
priority to loss fwd
CT P8 Losses
Case IV Losses
Priority
1. Sideways against
other Case IV
2. Forward against
future Case IV
Case IV Excess CA
priority
1. Offset against total profits
of current period
2. Carry back to offset total
profits of prior period
3. Carry forward against
future Case IV
CT P8 Losses
Case V Losses
Priority
Case V Excess CA
priority
1. Calculate net loss
2. Carry back against Case
V of prior length period*
3. Forward against future
Case V – after Case V
CA claim
4. Cannot be group
relieved
* 2 year time limit
1. Offset total profits
current period
2. Carry back against total
profits of prior period
3. Carry fwd against future
Case V
4. Can be group relieved
CT P8 Trading Losses
• Categorise 12.5% trading losses and
other
• 25% Losses include land dealing,
minerals or petroleum exploration
• 12.5% trading losses = “relevant trading
losses”
Relevant Trading Losses
• S.396A(3) TCA 97 - Order of set off
• First against other 12.5% trading income
of AP, foreign divs @12.5%,income from
certain financial trades @12.5%
• Second against income of prior period of
equal length from 12.5% trade or 12.5%
financial trades
Relevant Trading Losses
• No carry back against foreign divs @12.5%
• Time limit – within 2 years of end of AP in
which loss incurred
• Apportionment of profits if prior AP longer
than AP of loss
• S.396A(4) TCA 97 – if AP of prior year is
shorter, full loss allowed and any balance
claimed in second last period –
apportionment for remaining period
Relevant Trading Losses
• S.396A(4) TCA 97 timing of claims
• Prior period income first reduced by trading
losses fwd before setting off relevant trading
losses carried back
• S.396A(3) TCA 97 – relevant trading losses
offset first against income of current AP and
excess then carried back to prior AP
• Relief under S.396A (current or future AP but
not group relief) comes before deduction of
current S.243A TCA 97 charges
Trading Losses Example
A Ltd Trading Company
2012 Financial Statements
Profit/Loss before Tax
(€80,000)
Deposit Interest
€16,000
2011 Tax Computation
Case I
€100,000
Case III
€20,000
Trading Losses Example
2012 CT Comp
Loss per A/Cs
(€80,000)
Deposit Interest
€16,000
Case I Loss
(€96,000)
Carry back of loss to 2011
Case I
€100,000
Loss carried back against 12.5%
CT payable for 2011 reduced to
(€4,000 x 12.5%)+(€20,000 x 25%)
(€96,000)
€4,000
Value Basis Relevant Trading Losses
• S.396B TCA 97
• Applies to losses that cannot be relieved
against 12.5% income under S.396A TCA
97
• Euro for euro loss relief takes precedence
over value based relief
• Reduction of tax payable
• CT on 25% income and CT on gains
Relevant Corporation Tax
• Value based relief reduces “relevant
corporation tax” = CT liability before:
– S 239 and 241 debits and credits for income
tax
– Value before group relief (S.420B TCA 97)
– Close co surcharges (S.440/441 TCA 97)
• Allowed in year of loss and carried back
to prior AP of equal length
• Time limit –within 2 years of AP of loss
Non Trade Charges/Mgt Expenses
A Ltd Solution
• A Ltd Solution
Case 1
Case 111
CT @ 25%
25%
€50,000
(€40,000)
€10,000
€2,500
VB Loss Relief (€20,000 (€2,500)
@ 12.5%)
Profits Chargeable
NIL
Non Trade Charges/Mgt Expenses
•
•
•
•
•
•
•
•
A Ltd Solution - Loss Utilisation
Case I Loss
€160,000
Actual loss used VB
(€2,500/12.5%)
(€20,000)
Deemed loss used non trade charges
(€40,000*25%/12.5%) (€80,000)
Balance loss fwd
€160k-€20k-€80k
€60,000
Relevant Trading Losses
• Carry forward of unrelieved trading losses
• S.396(1) TCA 97
• Losses c/fwd indefinitely against same
trade
• Must be set against first available income
from the same trade
• No claim needed
Excepted Trade Losses
• 25% trade
– Land dealing/mineral/petroleum activities
• S.396(2) TCA 97 current and prior years
1. Against profits of current AP
2. Against profits of prior period*
3. Carry forward against future income of
same excepted trade
• * Equal length rules and 2 year time limit
Summary Chart
Current Period Prior Period
Carry Forward
€ for €
€ for €
Value € for € Value
Based
Based
Value
Based
Case I @
12.5%
Case I @
25%





x

x

x

x
Case III
Trade @
25%

x
x
x

x
Terminal Loss Relief
• S.397 TCA 97
• Termination of trade with loss in final 12
mths trading
• Carry back of loss against previous profits
from the same trade for 3 years
• Time apportionment for “mismatching”
APs
Terminal Loss Relief
• S.397(3) TCA 97 - Relief for losses fwd
and trade charge take precedence over
TLR
• TLR not allowed to extent loss could be
claimed in another way
• TLR can only be made when all other
claims for loss relief exhausted
CT P9: Deduction for CT Credits
• Credit is deducted from CT liability after
– Applying 12.5% and
– Applying CT Principles 1-8
– R&D is the only form of CT tax credit
Research and Development
• Who can claim? Where must R&D be
carried out?
– Companies within charge to Irish CT
– Branches of overseas companies included
– Irish resident companies – R&D cannot be tax
deductible in another country
• R&D activities carried on within EEA
• Co does not have to hold the intellectual
property rights
R& D
• S.766(1) TCA 97 – qualifying activities
– Basic Research
– Applied Research
– Experimental Development
• Activities in the fields of
– Natural sciences
– Engineering and technology
– Medical or agricultural sciences
R&D
• SI No 434/2004 and Revenue Guidelines
• Expanded list of areas and exclusions
• Routine testing, mgt studies/research ≠
R&D
• Activities must aim to
– Advance scientific or technical knowledge
– Resolve scientific or technological uncertainty
R&D
• Commercialism of technology or
investigations on commercial viability of
an idea ≠ R&D
• Once scientific or technological
uncertainty is resolved, expenditure
beyond that point does not qualify
R&D
• Exclusions
– Expenditure financed by grants
– Tax exempt royalties
– Royalties in excess of arm’s length rate
– Interest
• “Double Deduction” effect
– Deduction and credit
R&D
Example: X Ltd
Qualifying R&D of €40,000
Sales
€100,000
R&D Expenses
(€40,000)
Taxable Profits
€60,000
CT @ 12.5%
€7,500
Credit for R&D
€40,000 @ 25%
(€10,000)
CT Liability
NIL
Excess R&D Credit c/fwd
€2,500
Value of Credit = 37.5%
12.5% + 25%
R&D
• 100% claim for expenditure on R&D plant
and machinery purchased in period as
part of incremental expenditure
• Capital allowances on same capital items
also allowed
• SIAs qualifying for S.291A TCA 97 CA are
excluded
R&D
• Pooled costs on R&D qualify for the credit
• Subcontracting can mean no R&D credit
• R&D credit allowed where subcontractor is
– A university or 3rd level institution in EEA.
Costs up to 5% or €100,000 can qualify
– Others – costs up to 10% or €100,000 can
qualify
– Subcontractor cannot claim R&D on same
expenditure or be connected with contractor
Incremental Expenditure
•
•
•
•
•
Companies formed before 2003
Base year = cos AP ending in 2003
Identify qualifying R&D in 2003 base year
Identify qualifying R&D in current AP
If current year > 2003  excess available
for R&D credit
• Cos formed after 2003 – all R&D
incremental
Calculation of R&D Credit
• Current Rate 25% of qualifying
incremental expenditure (20% up to 2008)
• S.766(2) TCA 97
• Credit first set against current period’s CT
• S.766(4A) TCA 97
• Unused excess set back to offset CT of
preceding period of equal length
• Excess still left after setting back can be
claimed for Revenue refund
Calculation of R&D Credit
• Refund of excess R&D Credit repaid in 3
instalments over 33 month period from end
of AP in which expenditure incurred
• First instalment is 33% of excess – payable
by filing date of AP of expenditure
• Remaining balance used to
– Reduce CT of next AP
– 50% of any remaining excess repaid after due
date for filing of next CT Return after original
claim CT Return
Calculation of R&D Credit
• Claim for R&D credit made in respect of AP
31st December 2012
• 50% refunded after filing of 31st December
2012 return
• Filing date for 2012 Return is 21st/23rd
September 2013
• Refund made after 21st/23rd September
2013
Calculation of R&D Credit
• Further excess reduces CT of following AP
• S.766(4B) TCA 97 - remaining excess paid
as 3rd installment after filling of 2nd CT
Return after CT Return giving rise to original
R&D claim
• Above example – after 21st/23rd September
2014
Maximum Amounts
• S.766B TCA 97 – applies cap
• Maximum amounts that can be paid to co
is greater of
– CT payable in 10 years prior to AP of claim
– Payroll liabilities (PAYE/PRSI/USC) for
Relevant payroll period
• “Relevant payroll period” extended
• Includes payroll for current and prior AP
Maximum Amounts FA 2011
• Increase to payroll cap restricted where:
– Co got refund for excess credits by reference
to CT in earlier period
– Co got refund for excess credits by reference
to CT in earlier period
• Payroll costs usually dominant R&D
• Companies with NIL CT entitled to relief
• Excess credits c/fwd if no claim made
Expenditure on Buildings
• S.766A TCA 97
• R&D credit for 25% of 100% cost of
certain buildings
• Building must qualify for IBAA
• S.766 TCA – no base year or incremental
expenditure  all expenditure qualifies
• Site cost and grants excluded
Expenditure on Buildings
• 35% of building must be used for R&D
activities carried out in EU/EEA country in
a 4 year period S.766A(1)(a) TCA 97
• 4 year period starts when building bought
or refurbished
• Clawback provisions S.766A(3) TCA 97
• Case IV assmnts if building ceased to be
used/sold within 10 years or ceases to be
used for same trade within 4 years
Clawback Exception
• From 1st January 2012
• Company makes claim for R&D
• Another company commences to carry on
the trade
• R&D building is transferred to that
company
• Successor Co claim unused R&D
• Both companies must be members of
same group
Employee R&D Relief
• S.472D TCA 1997
• From 1st January 2012
• Surrender by Co of R&D credit to key
employees
• Transfer of company’s credit to
employees
• Max credit = CT liability of company
• Reduced IT of employee – not USC/PRSI
• Employee IT rate cannot be < 23%
Employee R&D Relief
•
•
•
•
•
Key Employee
Cannot be a director
No material interest – 5%
Not connected
75% duties in conception or creation of
new knowledge, products, processes,
methods or systems
• 75% of emoluments qualify as R&D
R&D Administration
• S.766(5) TCA 97 - Claim within 12 mths of
end of AP
• S.766(1)(b)(vi) TCA 97 - claim for pre
trading expenditure – within 12 mths of end
of AP when trading commenced
• Records for R&D must be maintained
R&D Administration
• S.766(7) and (8) TCA 97 – Revenue may
consult with outside experts
• Co may object and appeal against choice of
expert
CT Compliance Process
• Part 41 TCA 97 – Self assessment
• S.951(1)(b) TCA 97 – requirement to file
Form CT1
• S.884 TCA 97 – specifies the data to be
provided
CT Compliance Process
Profits chargeable to CT Income - Cases and Schedules
Chargeable gains and allowable
losses
Charges exempt from IT
Distributions from Irish resident companies
Annual payments on which IT deducted S.238 TCA 97
IT on loans to participators S.438 TCA 97
Chargeable gains rolled over under reorg reliefs S.584 TCA 97
Income tax deducted from company’s income
Mgt expenses, capital allowances and balancing charges
Mandatory e Filing
•
•
•
•
•
Phased basis since January 2009
S.917EA TCA 97
Use of ROS compulsory
Phase 1 = LCD cases
Phase 2 = Companies with turnover
>€7.3m and > 50 employees
Mandatory e Filing
• Phase 3A 1st June 2011
– All companies, trusts, partnerships,
CIUs, EEIGs and Public Bodies
• Exclusions – rare for companies
• If Revenue happy no capacity to e
File
• Insufficient access to internet
Mandatory e Filing
• Penalties for non compliance
• €1,520 under S.917EA(7) TCA 97
• Applies for non e-filing and non epayment
• Surcharge 5% under S.1084 TCA 97
Mandatory e Filing
• Advisor is an “approved person” where
filing – S.917G TCA 97
• Employee is an “authorised person”
• Autorisation to file – S.951(5) TCA 97 Treated as filed by taxpayer
• Risk Management – tax consultant
should get written approval of client before
Tax Return is submitted
Expression of Doubt
• S.955(4) TCA 97
• Where taxpayer has doubt about
application of law or tax treatment of item
• Disclose uncertainty on Tax Return
• Full and true disclosure – protects against
penalties.
• Genuine doubt not motivated by tax
avoidance or evasion
Due date for Filing CT 1
• Electronic Filing – 9 mths after end of AP
• No later than 23rd of month in which 9
mth period ends
• Liquidation of co – any return due >3 mths
after liquidation commences is due at the
end of 3 mths or on 21st/23rd of 3rd month
• Manual filing – 21st of month
Due date for Filing CT 1
• A Ltd (prior to
Mandatory eFiling)
• AP 31st December
2010
• Manual CT Return
filed
• BA Ltd
• AP 31st December
2012
• Electronic CT Return
filed
• CT1 due 21st
September 2011
• CT1 due 23rd
September 2013
Late Filing
• S.1084 TCA 97 – late filing surcharge
• 5% of tax – max €12,695 – Returns filed
within 2 months of deadline
• 10% of tax – max €63,485 – Returns filed
more than 2 months late
• S.1085 TCA 97 – restrictions on loss relief
Loss Restrictions
Loss Relief provision
S.308(4) Excess CIV or V CA
S.396(2) Current and C/Back exc
trade
S.396A(3) Current and C/Back
rel trade
S.396B(2) Rel trade VB Current
and C/Back
S.399(2) Case V C/Back and
Fwd
Return ≤ 2
mths late
25%
Return > 2
mths late
50%
25%
50%
25%
50%
25%
50%
25%
50%
Loss Restrictions
Loss Relief provision
S.411 Group Relief
S.420 Group Relief – Excepted
Trade, Excess Case IV/V CA,
Excess Mgt Exps/non trade charges
S.420A(3) Group Relief relevant
trading losses and excess trade
charges
S.420B(2) Group Relief VB relevant
trading losses and excess trade
charges
S.1085 Max Restriction
Return ≤ 2 Return > 2
mths late mths late
25%
50%
25%
50%
25%
50%
25%
50%
€31,740
€158,715
CT Assessments
• S.954 TCA 97
• Inspector makes assessment after CT1
filed
• If CT1 is late – inspector may make
estimated assessment
• Assessment based on CT1
• Check that assessment reflects data on
CT1
CT Assessments
• Taxpayer may request an assessment
• Useful to show entitlement to tax credits
for Irish tax by non resident shareholder
• S.955 TCA 97 – 4 year time limit for
Inspector to amend assessment
• Within 4 years after chargeable period in
which CT1 due for filing
CT Assessments
• 4 Year time limit does not apply where
– Full and True disclosure not made
– Appeal determined by Courts or Appeal
Commissioners
– Event occurs after filing of CT1
– Error in calculation
– Mistake of fact – asst does not reflect fact
disclosed
• S.955(3) TCA 97 Right to appeal
CT Payments
• S.958 TCA 97 – corporation tax payments
• Extremely complex due to amendments
• New small companies – total liability of
€200,000 or less – reduced where AP < 1
year
• No Preliminary Tax due
• CT liability payable on CT 1 filing date
CT Start Up Exemption
• S.486C TCA 97 – 3 year exemption
• Company incorporated on or after 14th
October 2008
• Commence a new trade in 2009 - 2014
• Income taxable @ 12.5%
• Trade not carried on previously
• Cannot be liable to close co service surcharge
CT Start Up Exemption
• Full exemption if CT on income and gains
≤ €40,000
• Marginal relief where CT between
€40,000 - €60,000
• Profits or adjusted chargeable gains up to
€320,000 fully relieved
CT Start Up Exemption
• Restrictions for APs commencing on or
after 1st January 2011
• Ceiling based on the Employer PRSI paid
in AP
• Maximum €5,000 PRSI per employee
• Include ER PRSI that would have been
paid if exempt under Job Incentive
Scheme
CT Start Up Exemption
• Maximum relief thus is €5,000 per
employee subject to the overall limit of
€40,000.
• “Qualifying Trade” amended FA 2011
• Excludes activities of a company if same
carried on in associated company
Small Companies
• CT liability in previous AP of ≤ €200,000
• Due dates for tax follow same rules as CT
Returns
• Preliminary Tax Due: 23rd(21st) day of
month 11 of AP
• Balance of Tax Due: 23rd (21st) day of
month 9 after AP
• PT must be at least the 90% of current
period or 100% of prior period
Small Companies
•
•
•
•
•
•
•
In determining €200,000 CT limit
Can exclude income tax S.239 TCA1997
Rev eBrief 28/2008
Rev eBrief 28/3008
Income tax due when PT due
Treat IT as CT
S.239(5) TCA 1997
Large Companies
• CT liability in previous AP of > €200,000
• Due dates for tax follow same rules as CT
Returns
• 1st instalment Preliminary Tax Due:
23rd(21st) month 6 of AP
• 2nd instalment Preliminary Tax Due:
23rd(21st) month 11 of AP
• Balance of Tax Due: 23rd(21st) month 9
after AP
Large Companies
• Level of payment required
• PT 1st Instalment: Lesser of 45% of
current period liability or 50% of liability of
prior year
• PT 2nd Instalment: Amount to bring total
payment to 90% of current year liability
• Balance of liability due on CT1 filing date
Large Companies – CGT
•
•
•
•
•
•
Chargeable Gain in last month of AP
Tax payable due 21 days after AP
AP ended 31st December 2012
Chargeable Gain in December 2012
Tax payable by 23rd December 2012
Applies also to small company opting to
pay PT based on 90% current year CT
PT Example
X Ltd Year Ended 31/12
Current Year CT
€350
Prior Year
CT €300
PT1 Lower of
€350*45% = €157.5k
€300*50% = €150k
Paid
€150k
Due Date
23rd June
PT2
€350*90% = €315k
Payable
€315k-€150k
=€165k
Due Date
23rd Nov
Balance
€35k
23rd Sept CT1 Filing
Date
CT and Short APs
• APs shorter than 1 mth +1 day – due date
for PT is last day of the period or 23rd of
month if period ends between 23rd day
and end of the month
• AP of large co longer than above, but
shorter than 7 mths, small co rules apply
• One PT payment in penultimate month
Failure to pay Correct Amt
• S.958(4) TCA 97 – interest on
underpayment from due date
• Risk management as penalty for wrong
payment is disproportionate to quantum of
error
• Prior Year CT €100 and Current Year CT
= €1m
• If €100 paid after 23rd/21st of 11th mth 
Interest on €999k from due date
Group Companies – Offset PT
• S.958(11) TCA 97
• Group co which is not a “small co”
• If PT<90% a group co can surrender any
excess>90% PT
• Cos must have same APs
• Joint election to Collector General on or
before filing date
• Claimant co must pay all liability by filing
date
Other Returns to File
• Other information returns are due for filing
at the same time as CT1
• S.889 TCA 97 - Form 46G
• S.894 TCA 97 – 46G is a Self Assessment
Return
• Payments for services >€6,000 where no
tax deducted
• Detail needed of name, PPSN, Address
and nature of services provided
• Mandatory e-Filing applies
Other Returns to File
• S.891 TCA 97 – Return of interest paid
gross
• S.894 TCA 97 self assessment
• Banking and trading cos paying interest
on trade borrowings
• Payment > €65
• Name, address and amount of interest
Other Returns to File
• S.891A TCA 97
• Return of interest paid without deduction
of tax under S.246(3)(h) TCA 97*
• Companies trading in Ireland that have
been financed by foreign borrowings
• Name, address, amount paid and country
of residence
• *Interest can be paid gross if paid for trading purposes
by a co to another co res in EU/DTA country
Professional Skills for CT
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Research Skills and Risk management
What are the sources of research for CT?
Engagement of 3rd parties
Firm’s risk management procedures
Shareholder and director details
SEC and other restrictions
Group structure
Mandatory e-Filing
Professional Skills for CT
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Close Company Issues
Year end and length of AP
Cos sources of income and CT rates
Changes in ownership
Effect on residence
Report Writing/Communication
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Writing style appropriate to reader
Build rapport
Aim to be main contact person for client
Are you communicating with person who
has required authority
Professional Obligations/Ethics
• Have you followed Standard of
Professional Conduct?
• Check for conflict of interest in Code of
Ethics
• Is your practice over reliant on one client?
Money Laundering
• When were the last checks carried out?
• Is an up to date co search needed?
• Was there a change in ownership since
last ML checks done?
• Have you checked current ML law and
CCABI Guidelines?
• Consult CAI website on ML
Professional Skills and CT
• Do not rely on familiarity with client
• Example of query on sale of London office
block
• Always use Tax legislation and check
basics
• S.23A TCA 97 was not consulted
• Incorrect advice may have been given
CT Round Up
• Company Residence
• Incorporation Rule and Case Law
• Trading and Treaty exceptions to
incorporation rule
• Irish resident companies liable on
worldwide income
• Non Resident Cos liable on trading
branches
CT Round Up
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Calculation of Corporation Tax
CT Rates
Trading v Passive Income
Case Law and Badges of Trade
Revenue Guidance on trading v passive
Accounting Periods – linked to the CT
compliance process
CT Round Up
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From FS to CT comp
Steps in preparation of CT comp
9 CT Principles
GAAP/IFRS
Foreign Trades
Foreign dividends and 12.5% rate
Capital Allowances
Chargeable Gains
CT Round Up
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Losses
Value based relief
Charges
Offset Rules for losses
CT Round Up
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Research & Development
CT Compliance Process
Tax Filing deadlines
Tax payment dates
Small and large companies
Start Up Exemption
CT Round Up
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Professional Skills for CT
Report writing and communication
Professional Obligations/Ethical Values
Money Laundering
Learning Outcome
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Scope of charge to CT
Apply correct CT rate
Commencement and cessation of AP
Treatment of dividends
CT Rate for foreign dividends
CGT rebasing for CT computation
Learning Outcome
• Use of losses and charges
• Relevant and non relevant trade charges
deductions
• Losses on € for € and Value basis claims
Learning Outcome
• Identify and calculate R&D Credit
• Advise on compliance issues and
obligations for companies
• Apply accounting for tax principles to CT
principles
• Use professional skills for CT
engagements