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GAZETTE
JULY/
A
UGUST
1987
where the disponer dies domiciled
in either or both, but the proviso at
the end of the Article limits its
operation.
The
Situs
Code is printed in full
at the end of this article.
Where the property does not fall
within the
Situs
Rules, the locality
will be determined according to the
law of the country other than that
country in which the disponer was
domiciled.
The
proviso
in Article III (2)
states that if, apart from its Rules,
including the last mentioned Rule,
any property would: —
(a) be situate in the territory of
one of the t wo countries,
and
(b) be liable to duty in that
country,
then the Rules are not to apply to
such property unless, by reason of
their application or otherwise, du-
ty would be imposed or would, but
for some specific exemption, be
imposed thereon by the
other
country.
This Supplementary Rule ap-
pears to mean that if property, for
exmaple, is situated in Ireland
under General Law but is deemed
under the
Situs
Rules, to be
situated in the U.S.A., the
Situs
Rules will not apply to that proper-
ty unless, by reason of their
application or otherwise, duty
would be imposed in the U.S.A. on
that property, or would be so
imposed but for some specific
exemption (e.g. initial exemption)
on that property.
The object of this is to prevent
escape of tax in both countries.
For example, L. T., an American-
domiciled citizen, is life-tenant
under his father's (U.S. domiciled)
settlement, which contains an
Irish bank account.
There is no U.S. tax because
the life-tenant was neither the
settlor nor competent to dispose
of the property in settlement;
Article III (2) (c) would deem the
Bank Account to be situate in
the U.S. under normal circum-
stances.
Because of this, the Account
would escape tax in both coun-
tries. However, the proviso en-
sures that Rule (c), under which the
account would be deemed situate
in America, does not apply and Irish
Inheritance Tax would be payable
on the account.
On the other hand, if a person
domiciled in the U.S. owns as part
of his Free Estate Irish Government
Securities, their
situs
is deemed
under Rule (c) of Article III (2) to be
in America, and Inheritance Tax
would not be payable on them even
though no tax is payable in the U.S.
by reason of an exemp t i on
threshold.
Article IV (3) preserves the right
of the Irish Authorities to impose
tax on a settlement having Irish
proper law.
Article V contains the provisions
relating to the allowance or credit
for tax in the other country.
Where either country imposes
tax by reason of domicile or, in the
case of the U.S. being its national,
on property situate solely in the
other country, the first country is
to give a credit against its tax for
the tax imposed on the same pro-
perty in the second country, but
the credit is not to exceed the
amount of the tax on that proper-
ty in the first country. For example,
where property which is situate in
the U.S.A. is taken on the death of
a disponer who dies domiciled in
Ireland, an allowance against In-
heritance Tax is made for the
amount of the Federal Estate Tax
(up to the amount of the In-
heritance Tax) payable in respect
of the same property. The same
will apply if the domiciles and situa-
tion were reversed and, for this
purpose, locality or
situs
is deter-
mined in accordance with Article III
(2).
Article V
In paragraph (3) of Article V, if the
property is taken under a disposi-
tion regulated by Irish law, credit
will also be given in Ireland.
Article V (2) provides for propor-
tionate relief applicable where the
disponer is deemed to be domicil-
ed in both countries and property
taken on his death is treated as
situate in both countries.
Where this
happens,
an
allowance is to be made by each
country on the basis that the duty
in each country is to be propor-
tionately reduced to such an extent
that the total duty payable in both
is equal to the greater of the
amounts which would otherwise
be payable in the t wo countries
separately. For example if £400.00
is the amount of the Inheritance
Tax on the doubly taxed property
and £600.00 is the amount of the
Federal Estate Tax on the property
(apart from the Convention) then
the credit is as follows:
Total
Federal
Estate Inheritance
Tax
Tax
Tax
before
credit £600.00
£400.00 £1,000.00
Credit £240.00
£160.00
£400.00
(600 x 400)
(400 x 400)
(1000
(1000
Net
Tax
£360.00
£240.00
£600.00
N.B. The lesser amount of Tax is always
utilised for the purpose of this calculation.
The latter part of Article IV (4) pro-
vides for the case where Ireland
and the U.S.A. both deem domicile
and there is property situate in a
third territory which is taxed in that
third territory, on the basis of
Situs
there. For example, the tax on this
property before the application of
any double taxation relief is as
follows: —
Tax in Third Territory£200.00
Tax in Ireland
£400.00
Tax in U.S.A.
£600.00
The Third Territory tax remains at
£200.00. Under a Convention with
the Third Territory, or under Sec-
tion 67 of the C.A.T. Act, 1976,
Ireland gives a credit of £200.00
against Inheritance Tax and claims
a net amount of £200.00 Tax. The
U.S.A. also gives a credit of
£200.00 against its tax (under a
Convention or unilaterally) and
claims a net amount of £400.00
tax.
The credit to be given is then:
Federal Estate Inheritance
Tax
Tax
£400.00
Credit £130.00
(400 x 200)
(600
)
Tax
Total
£200.00
£600.00
£70.00
£200.00
(200 x 200)
(600
)
Net
Tax
£270.00
£130.00
£400.00
Third Territory
£200.00
£600.00
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