Tax Appeals Commission determination 17TACD2019 regarding Corporation Tax (Group Relief), 2019

• Administrative Decision Number: 17TACD2019
• Year: 2019
• Date: 12 April 2019
• Subject Matter: Corporation Tax (Group Relief)
• Respondent: REVENUE COMMISSIONERS

AC Ref: 17TACD2019

NAMED REDACTED

AND

NAMED REDACTED

Appellants

V

REVENUE COMMISSIONERS

Respondent

DETERMINATION

Introduction

1. The issue in these appeals is whether the Appellants are entitled to group relief

pursuant to Taxes Consolidation Act 2007 (TCA), section 411.

2. In this regard, the Respondent has refused the claims to group relief on the basis that

Name Redacted LLC (LLC), a Delaware corporation under the Delaware Limited Liability

Company Act, is not a company and in particular is not a company for Irish tax

purposes. Furthermore, the Respondent submits that LLC is treated as transparent for

US tax purposes and accordingly the default US tax treatment is to be treated as an

entity disregarded from its owner. On this basis, the Respondent asserted that LLC is

not resident in the US for tax purposes and has denied relief accordingly.

Issue

3. The parties to this appeal have therefore agreed that the following three issues are to

be determined by the Tax Appeals Commission, namely:

a) Is LLC, a limited liability company in the United States incorporated under the law

of Delaware, a ‘company’ for the purposes of TCA, section 411?

b) If such an entity is to be regarded as a ‘company’, is it resident in the US for the

purposes of tax?

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c) What, if any, is the impact of anti-discrimination provision contained in Article 25

of the DTA?

Background

4. LLC was formed as a Delaware “corporation” on Date Redacted. On Date Redacted, it

converted to a Delaware limited liability company, pursuant to a certificate of

conversion. It is a Delaware “Limited Liability Company” under the Delaware Limited

Liability Company Act.

5. LLC’s registered office is at Address Redacted. The owners of LLC hold member

interests in the LLC.

6. LLC’s purpose is to directly, and through other entities including its subsidiaries, engage

in securities trading and securities services activities and other additional related

services.

7. LLC prepares a standalone income statement and balance sheet and prepares

consolidated financial statements under US GAAP which includes the financial

information of its wholly-owned subsidiaries. These financial statements are audited in

the US, currently by Auditor Redacted.

8. LLC controls the capital of a number of companies. For the purpose of this appeal the

relevant companies are Name Redacted (“SL”), Name Redacted (“GL”) and Name

Redacted (AL), all Irish resident companies.

9. Claims for group relief were made as follows:

2010 – GL surrendered group relief of €Million to SL

2011 – claim for GL to surrender group relief of €Million to SL

2012 – claim for SL to surrender group relief of €Million to AL

10. The Respondent refused these claims as not being available under TCA, section 411. As

such, Notices of Amended Assessment issued by the Respondent and were appealed

by the Appellants.

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Legislation

Taxes Consolidation Act

11. For corporation tax losses purposes, a group consists of a parent company and its 75%

subsidiaries. Two companies are deemed to be members of a group of companies if

one company is a 75% subsidiary of the other company, or both companies are 75%

subsidiaries of a third company. TCA, section 4(1) defines a ‘company’ for the purposes

of the Corporation Tax Acts as “any body corporate”.

12. TCA, section 411 provides for the allowance of trading losses of a group member

against the profits of other group members. However, for the purposes of this appeal

there are two different regimes in place due to legislative change introduced by

Finance Act 2012. Therefore, for the years 2010 and 2011, TCA section 411 did not

provide for relief where the parent company was resident outside the EU and the EEA.

The changes introduced by Finance Act 2012 amended TCA, section 411 to include

companies who were resident in territories that had concluded a double tax treaty

with the State.

13. TCA, section 411(1)(a) provides the following definitions in respect of the years 2010

and 2011:

““relevant Member State” means—

(i) a Member State of the European Communities, or

(ii) not being such a Member State, an EEA State which is a territory with the

government of which arrangements having the force of law by virtue of

section 826(1)]3 have been made.”

““tax”, in relation to a relevant Member State other than the State, means any tax

imposed in the Member State which corresponds to corporation tax in the State;”

“2 companies shall be deemed to be members of a group of companies if one

company is the 75 per cent subsidiary of the other company or both companies are

75 per cent subsidiaries of a third company.”

14. Correspondingly, for accounting periods ending before 1 January 2012, TCA, section

411(1)(c) provided as follows:

(c) References in this section and in the following sections of this Chapter to a

company shall apply only to a company which, by virtue of the law of a

relevant Member State, is resident for the purposes of tax in such a Member

State, and in determining for the purposes of this section and the following