in Great Britain or Northern Ireland in like manner in all respects as if he were resident in the Irish Free State but not resident in Great Britain or Northern Ireland.

4. For the purposes of this Agreement a company, whether incorporated by or under the laws of Great Britain or of Northern Ireland or of the Irish Free State or otherwise, shall be deemed to be resident in that country only in which its business is managed and controlled.

5. The Commissioners of Inland Revenue and the Revenue Commissioners may from time to time make arrangements generally for carrying out this Agreement and may in particular make such arrangements as may be practicable to avoid the collection of both British and Irish Free State income tax on the same income without allowance for any relief due under this Agreement, and the Commissioners of Inland Revenue and the Revenue Commissioners may make such regulations as they respectively think fit for carrying out such arrangements.

6. The obligation as to secrecy imposed by any enactment with regard to income tax shall not prevent the disclosure by any authorised officer of the British Government to any authorised officer of the Government of the Irish Free State or by any authorised officer of the Government of the Irish Free State to any authorised officer of the British Government of such facts as may be necessary to enable full effect to be given to this Agreement.

7. Any question that may arise between the parties to this Agreement as to the interpretation of this Agreement or as to any matter arising out of or incidental to the Agreement shall be determined by such tribunal as may be agreed between them, and the determination of such tribunal shall, as between them, be final.

8. This Agreement shall be subject to confirmation by the British Parliament and by the Oireachtas of the Irish Free State and shall have effect only if and so long as legislation confirming the Agreement is in force both in Great Britain and Northern Ireland and in the Irish Free State.

MEMORANDUM explaining the Agreement between the British Government and the Government of the Irish Free State in respect of Double Income Tax

PRESENTED TO PARLIAMENT

BY COMMAND OF HIS MAJESTY

LONDON:

PRINTED & PUBLISHED BY HIS MAJESTY'S STATIONERY OFFICE To be purchased directly from H.M. STATIONERY OFFICE at the following addresses: Adastral House, Kingsway, London, W.C.2; 28, Abingdon Street, London, S.W.1; York Street, Manchester; 1, St. Andrew's Crescent, Cardiff;

or 120, George Street, Edinburgh;

or through any Bookseller

1926

Price 1d. Net

Cmd. 2654

British Government and the Government of the Irish

Free State in respect of Double Income Tax.

THE Agreement between the British Government and the Government of the Irish Free State in respect of Double Income Tax (Cmd. Paper 2632) is based on the solution of the double income tax problem which is described in the Report of a Committee of Economists to the Economic and Financial Commission of the League of Nations as "the most desirable practical method of avoiding the evils of double taxation." The underlying principle is that Great Britain (including Northern Ireland), on the one hand, and the Irish Free State, on the other hand, shall each exempt from its tax income arising from sources within its borders to persons who, not being resident within its borders, are resident in the other country, and that income shall be taxed only by the country in which the person entitled to the income resides.

2. This principle of the exemption of the non-resident and of taxation solely by the country of residence has already been applied in relation to certain countries in the case of income derived from shipping, under the powers conferred by section 18 of the Finance Act, 1923. Under the Agreement with the Irish Free State it will be applied without restriction as to the nature of the income, so that a person resident in either Great Britain (including Northern Ireland) or the Irish Free State, but not resident in both countries, will be liable to income tax, and to super-tax where chargeable, in his country of residence only, and will be entitled to exemption from the tax of the other country in respect of all his property situate and profits or gains arising therein.

3. Exemption from Irish Free State tax will be granted by the Irish Free State Revenue Commissioners to a person who proves to them that he is resident in Great Britain or Northern Ireland but not resident in the Irish Free State, either by the non-charging of that tax, where this course is practicable, or by repayment. The title to exemption must be proved by written declaration; the forms of declaration will be obtainable in due course from the Irish Free State Revenue Commissioners and from H.M. Inspectors of Taxes in Great Britain and Northern Ireland.

4. A person resident in Great Britain or Northern Ireland who is entitled to exemption from Irish Free State tax in respect of income from the Irish Free State on the ground of non-residence in that country will be made liable to British tax, under the proposals contained in the Finance Bill, in respect of that income whether or not it is so chargeable under existing law. Under the existing law British tax in respect of income arising abroad is in certain circumstances chargeable only on the amounts remitted to this

country, but it is a necessary corollary of the exemption of the nonresident and the taxation of income by the country of residence only that all the income exempted by the country of origin should be taxed by the country of residence.

5. The double resident (i.e., the person who is resident both in Great Britain, including Northern Ireland, and in the Irish Free State) is, ex hypothesi, not entitled to exemption from the tax of either country on the ground of non-residence, but will be liable in each as a resident. He will, however, be given double income tax relief by the two countries in respect of doubly taxed income to such an extent as will eliminate the lower of the two rates of tax, British and Irish Free State, at which he is liable (each country giving relief at one-half of the lower rate), and leave him ultimately to bear only the higher of the two rates.

6. Certain administrative arrangements will be made to facilitate the smooth working of the new scheme and to prevent, as far as is practicable, the initial double payment of British and Irish Free State tax on the same income without allowance for any relief due under the Agreement. The principal arrangements are as

follows:

(a.) Non-Deduction of British Income Tax from Irish Free State Dividends, &c.

Under the provisions of the Finance Bill, Bankers and other persons in Great Britain and Northern Ireland who are now under statutory obligation to deduct British income tax from Irish Free State dividends, &c., collected on behalf of their customers, will be empowered to pay over the proceeds of the dividends without deduction of such tax, provided that they furnished to the Commissioners of Inland Revenue full particulars of the dividends and the names and addresses of the customers, in order that the customers, where liable, may be directly assessed to British income tax in respect of the dividends. It will be for each customer to elect whether this course (which is designed to prevent the deduction of both Irish Free State and British income tax from the dividends) should be followed, and it therefore rests with him to procure the payment of the income without deduction of British tax.

(b.) Application of Tax repayable by the Irish Free State in Satisfaction of British Tax.

A resident in Great Britain or Northern Ireland who is entitled to repayment of Irish Free State tax on the ground of non-residence may authorise the Irish Free State Revenue Commissioners to make the repayment on his behalf direct to the Commissioners of Inland Revenue, to be applied in satisfaction of British tax due from him. The Commissioners of Inland Revenue will remit to him any excess of the repayment received by them over the British tax due.

(This arrangement also is designed to prevent the initial double payment of British and Irish Free State tax on the same /G 139 1500 5/26 F.O.P.·[14539]

Wt.

income without relief, and it will not therefore be applicable in the case of Irish Free State dividends, &c., in respect of which the recipient has elected, notwithstanding arrangement (a), to have British income tax deducted at the source.)

(c.) A Conjoint Office or Clearing House.

A Conjoint Office or Clearing House, in London, staffed by officers of the British and Irish Free State Inland Revenue Departments, will be established in order primarily to deal with the taxation difficulties of double residents. The double resident will be under statutory obligation to make returns to both countries, and will, subject to double taxation relief, be taxable by both countries, as explained in paragraph 5. The Clearing House will, however, at his request, collate particulars of his taxation liabilities in the two countries, will compute the amount of double income tax relief due to him and his aggregate liability, after allowance of the relief, to British and Irish Free State tax, and will endeavour so to arrange any payments or repayments of the tax of either country that may be due from or to him as will prevent his having at the outset to pay in the two countries more tax than in the aggregate is found to be ultimately due.