Written answers

Tuesday, 15 July 2014

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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244. To ask the Minister for Finance if he will provide a list of the exemptions applicable for withholding tax with an associated cost for each exemption; an analysis of the exemptions that could be abolished; the impact of their abolition; and the savings that would generate for the Exchequer. [31264/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I understand that the Deputy is referring to the exemptions applicable in respect of Dividend Withholding Tax (DWT). The legislation relating to DWT is contained in Chapter 8A of Part 6 (sections 172A to 172M) and Schedule 2A of the Taxes Consolidation Act, 1997 (TCA 1997). The primary purpose of DWT is to collect tax at source from dividend payments and other distributions made by Irish resident companies to Irish resident individuals who are chargeable to income tax on such distributions (with a credit allowed for DWT deducted).

Section 172C TCA 1997 provides that certain recipients of distributions are specifically excluded from the scope of the DWT. The categories of persons excluded from DWT under this section include:

- Irish resident companies;

- pension schemes, managers of approved retirement funds and PRSA administrators;

- qualifying employee share ownership trusts;

- collective investment funds and exempt unit trusts;

- managers of special savings accounts and special portfolio investment accounts;

- charities;

- athletic or amateur sports bodies; and

- permanently incapacitated individuals and thalidomide victims who are exempt from tax in respect of income arising from the investment of compensation payments awarded for the benefit of such persons. 

In addition, Section 172D TCA 1997 provides that the following non-resident persons qualify for exemption from DWT:

- individuals who are neither resident nor ordinarily resident in the State and who are resident in an EU Member State or in a country with which Ireland has a tax treaty;

- companies which are not resident Ireland and

- which are resident in another EU Member State or tax treaty country and not controlled by Irish residents;

- which are ultimately controlled by a person or persons resident in another EU Member State or tax treaty country; or

- the main shares of which, or the main shares of the parent company or companies of which, are substantially and regularly traded on a recognised stock exchange in an EU Member State or tax treaty country.

It should be noted that the exemptions contained in sections 172C and 172D TCA 1997 are not automatic and must be established by means of an appropriate declaration of entitlement to exemption completed by the applicant. 

I am informed by the Revenue Commissioners that, while they do not have a statistical basis for compiling estimates of the cost of the various exemptions from DWT, such exemptions are provided in respect of persons or bodies that are not chargeable to tax in respect of the dividend income concerned. Accordingly, if these exemptions were to be abolished, any DWT deducted would have to be refunded. This would result in an additional administrative burden for the recipient of the dividend and for Revenue and, ultimately, no net additional yield to the Exchequer.

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