STATUTORY INSTRUMENT

S.I. No. 644 of 2004

European Communities (Exemption from Tax for Certain Interest and Royalties Payments) Regulations 2004

I, Charlie McCreevy, Minister for Finance, in exercise of the powers conferred on me by section 3 of the European Communities Act 1972 ( No. 27 of 1972 ) and for the purpose of giving effect to Council Directive 2003/49/EC of 3 June 2003¹ as amended by Council Directive 2004/66/EC of 26 April 2004² and Council Directive 2004/76/EC of 29 April 2004³ , hereby make the following regulations:

1.       These Regulations may be cited as the European Communities (Exemption from Tax for Certain Interest and Royalties Payments) Regulations 2004.

2.       These Regulations apply as respects any payment made on or after 1 May 2004.

3.       Section 267G (inserted by the Finance Act 2004 (No. 8 of 2004)) of the Taxes Consolidation Act 1997 is amended in subsection (1) by substituting the following for the definition of “the Directive”:

“ ‘the Directive’ means Council Directive 2003/49/EC of 3 June 2003¹ as amended by Council Directive 2004/66/EC of 26 April 2004² and Council Directive

2004/76/EC of 29 April 2004³ ;”.

4.       Section 267J (inserted by the Finance Act 2004 ) of the Taxes Consolidation Act 1997 is amended by substituting the following for subsection (1):

“(1) Where interest or royalties are received by a company resident in the State from an associated company, credit shall be allowed for any withholding tax charged on the interest or royalties by a Member State pursuant to the derogations duly given from Article 6 of the Directive against corporation tax in respect of such interest and royalties to the extent that credit for such withholding tax would not otherwise be so allowed.”.

EXPLANATORY NOTE.

(This note is not part of the Instrument and does not purport to be a legal interpretation.)

These Regulations, which came into operation on 1 May 2004, provide for the coming into operation of EC Regulations 2004 relating to the exemption from tax for certain interest and royalties payments. These Regulations implement the 2004 Interest and Royalties Directive which in turn amends the 2003 Interest and Royalties Directive. The purpose of the Interest and Royalties Directive is to eliminate withholding taxes on cross-border interest and royalty payments between associated companies and branches in different EU member states. These Regulations provide derogations for transitional periods for certain new EU member states in the case of the application of the 2003 Directive. The derogations will permit the Czech Republic, Latvia, Lithuania, Poland and Slovakia to apply withholding tax on interest and/or royalty payments during the transitional periods. Credit will be given for such withholding tax against Irish tax on income from which such withholding tax was deducted. The Regulations also give effect to certain technical amendments to the Interest and Royalties Directive required by virtue of the accession of the new EU member states (adding their list of taxes and names of corporate entities).

¹ OJ No. L 157, 26.6.2003, p.49

² OJ No. L 168, 1.5.2004, p.35

³ OJ No. L 195, 2.6.2004, p.33

¹ OJ No. L 157, 26.6.2003, p.49

² OJ No. L 168, 1.5.2004, p.35

³ OJ No. L 195, 2.6.2004, p.33