As is the case with income tax, corporate income from sources outside Ireland is taxed under a separate category to the various categories of domestic Irish income (trading, rental, investment, distributions; Schedule D Case III.
Foreign source income may arise from a foreign trade or from foreign rental or investment income. Income and profits from foreign sources are calculated in accordance with Irish tax rules.
The income is treated as separate from domestic income sources. Therefore losses from a foreign source is not offset against profits of domestic sources or other foreign sources.
Foreign Income Types
Generally, foreign dividends investment and rental income are taxed at 25%. As set out separately distributions from trading income within the European Union may enjoy the 12 ½% tax rate.
Similarly, investment dividend and rental income from foreign sources are calculated in accordance with the Irish tax rules. However each is separate from the Irish trading, investment and rental tax calculations.
The rules for calculation of tax on rental income are set out in the section on income tax. Irish domestic rental income is taxable under a particular category Schedule D Case V.
Foreign rental income is taxable under schedule D case III. There are particular calculation rules for rental income and limited classes of the deduction.
A foreign trade is one which is undertaken and carried out wholly outside the State. Merely because there is substantial foreign business, does not constitute a separate foreign trade. Trade carried on partly in Ireland and partly abroad, is not a foreign trade.
A Irish resident and trading company with branches abroad is not taxed on the income of the branches as a foreign trade in most cases. The whole income is usually taxed as an Irish trade. It would usually also be taxed in the place where the branch is situated with the benefit of double taxation relief.
Other miscellaneous income
Schedule D Class IV covers miscellaneous classes of income that fall into no other category or case. There is very limited or no set off of costs or expenses allowed in the calculation.
It covers such matters as bank interest on which deduction has been made at source (DIRT) as well as various forms of intellectual property income, trading from illegal activities and post-cessation income..
Investment funds are subject to a special regime of taxation. There is tax on encashment of holdings in domestic funds as well as an eight-year deemed encashment charge. There are higher rates and different regimes applicable to offshore funds. See the section on the taxation of funds.
The tax returns require information to be given in relation to a company’s acquisition and disposal of an interest in a fund. Many types of payments from funds will be excluded from the corporation tax return while others are taxable as investment income. Losses on funds may not be set off against other fund income or profits generally.
Dividends received from Irish resident companies are not subject to corporation tax at all. Dividends also embrace distributions which are dividend like payments. See the separate sections of this area.
Dividends received from companies resident outside Ireland are subject to corporation tax. There may be double taxation relief.