Ireland Confirmes The Scenarios To Exempt Interest Payments To Hong Kong

; posted on
September 4th, 2018

The Irish Tax and Customs updated the Tax and Duty Manual and confirmed that, in certain circumstances, interest paid to Hong Kong should be exempted.

General Rule

Where the relevant territory provides for a territorial system of taxation, the law of the relevant territory may charge tax on income receivable by a company by reference to such income having its source in the relevant territory, rather than by treating the company as resident for tax purposes in that relevant territory. The company may be chargeable to tax on interest payments only to the extent that such interest payments are treated as derived from a source within the relevant territory. Where such a territorial system applies to the company by which interest is receivable, that interest will not be exempt from tax under section 246(3)(h)(I) TCA 1997 or section 198(1)(c)(ii)(I) TCA 1997.

Conditions of Interest Exemption

However, where:

  • such interest is paid to a company treated as resident in Hong Kong for the purposes of the double tax treaty with Ireland and
  • the interest is subject to the full rate of corporate income tax that applies in Hong Kong, on the basis that it is treated, by virtue of the law of Hong Kong, as derived from a Hong Kong source

it will be treated by Revenue as exempted:

  • under section 246(3)(h)(I) TCA 1997, from withholding tax and
  • under section 198(1)(c)(ii)(I) TCA 1997, from the charge to income tax.

Where the interest is not treated as a Hong Kong source of income of a Hong Kong resident company it will be subject to withholding tax and chargeable to income tax.

Source: Irish Tax and Customs

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