Annex 1: Minor changes in the law made by the Act: Change 67: Territorial scope of charge to tax: land in Ireland: section 269
This change concerns income from land in the Republic of Ireland arising to a person whose other foreign income is assessed on the remittance basis.
The change makes it clear that businesses and transactions for generating income from land in the Republic of Ireland form part of an overseas property business of a person to whom the remittance basis applies.
The basic rule is that income arising from property in the Republic of Ireland is assessable on the basis of the amount arising (see section 68(1) of ICTA). This rule applies “notwithstanding anything in section 65 [of ICTA]”. Section 65(5) of ICTA provides for the remittance basis to apply to foreign income.
Section 65(4) of ICTA provides that section 65A of ICTA (overseas property businesses) does not apply in relation to persons to whom the remittance basis applies.
It is not clear how the rules in sections 65A and 68(1) of ICTA interact. Section 68(1) of ICTA does not refer to section 65A of ICTA. If it was Parliament’s intention that Irish income was to be assessable on the arising basis but not in accordance with section 65A of ICTA, it might be expected that section 68(1) of ICTA would apply notwithstanding sections 65 and 65A of ICTA.
So far as Irish income is concerned, the rule in section 65(4) and (5) of ICTA that the income of a person to whom the remittance basis applies is not to be assessed on the arising basis but on the remittance basis is not to be read literally. Section 68(1) of ICTA secures that income arising in the Republic of Ireland is assessed on the arising basis even if it arises to a person to whom the remittance basis applies.
It is likely that Parliament intended the reference to section 65A in section 65(4) to be read in this light. In other words the overseas property business rules were not to apply in relation to the income of a person to whom the remittance basis applies that was actually charged on the remittance basis.
Section 269 makes it clear that the overseas property business rules are to be used in calculating a person’s income from Irish property even if the remittance basis applies to the other foreign income of that person.
In theory this change may allow a taxpayer to set a loss sustained in letting one Irish property against profits arising from letting another.
This change is adverse to some taxpayers and favourable to others in principle. But it is expected to have no practical effect as it is in line with current practice.