Irish Revenue’s eBrief No. 030/25 on 31 January 2025 introduces updates to Tax and Duty Manual Part 08-02-01, refining Corporation Tax rules on income charges and adding a new section 4.6 focused on company dissolution.
This manual provides an overview of relief from corporation tax for charges on income. It sets out information in relation to:
- What charges on income are and the conditions payments must meet to rank as charges on income in accordance with section 243 Taxes Consolidation Act, 1997 (“TCA 1997”). It also sets out how charges on income relating to a trade, relevant trading charges and non-relevant trading charges may be relieved from corporation tax (see Part 2 of this manual).
- There is an exception to the general prohibition in section 243(7) that interest is not to be treated as a charge on income. In accordance with section 243(8), the general prohibition does not apply to interest paid on a loan which qualifies for relief under section 247 TCA 1997. Part 3 of the manual provides an overview of relief for interest available under section 247.
- Miscellaneous matters relating to charges on income including, subject to exceptions, the obligation to withhold tax on the payment of interest to nonresidents in accordance with section 246 TCA 1997 (see Part 4 of the manual).
Companies need to consider how the dissolution of a company as part of a merger or division may impact on a claim for interest relief under section 247 TCA and, whether that event will trigger a recovery of capital under section 247 or section 249.
The investing company must satisfy the requirements of section 247 and, specifically the conditions specified in section 247(3), see paragraph 3.4 of this manual, must be satisfied in relation to the investee company on an ongoing basis throughout the term of the loan. Where the merger or division involves the dissolution of the investing company or the investee company, these fundamental conditions for relief will not be satisfied and relief will cease to be available.
