Tax Appeal 47TACD2024

The issue was whether Royalty Withholding Tax (RWHT) incurred by the appellant in foreign jurisdictions on royalty income is deductible as an expense under section 81 of the Taxes Consolidation Act 1997 (TCA 1997).
The appellant argued that RWHT is an expense incurred in earning income from its trade and should be deductible. The Revenue Commissioners contended that RWHT is a tax on income and not deductible.
The Tax Appeals Commission considered various legal precedents and accounting standards to determine the nature of RWHT and its deductibility.
The Commission found that in most jurisdictions, RWHT was imposed on the appellant's gross royalty income, irrespective of profits. Therefore, it was incurred for the purpose of enabling the appellant to carry on its trade and earn profits.
The Commission determined that the appellant is entitled to deduct RWHT as an expense under section 81 of the TCA 1997 for all jurisdictions, except Argentina where it was unclear if RWHT was imposed on gross royalties.
As the appellant succeeded on the section 81 argument, the Commission did not consider the alternative argument related to Schedule 24 of the TCA 1997 regarding relief from double taxation.
In summary, the Tax Appeals Commission largely ruled in favor of the appellant, allowing deduction of RWHT as a business expense, except for RWHT incurred in Argentina pending clarification.

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