This section is the section which operates for the relief of the taxpayer to ensure that there is not double taxation. Corporation tax will be charged on the profits of the company which makes the distribution. The tax will not be charged again on the recipient of the distribution.

The theoretical consideration here, of course, is whether we are encouraging companies to retain the profits of the investments. This question arises on section 2.

The purpose is to prevent corporation tax being charged twice.

If the profits of the company are paid out as dividends, they are free in the hands of the person receiving them. There is no encouragement to a company to retain these.

I take the Deputy's point. In other words, there is no penalty arising by paying them out so they might as well let them be paid out.

It is very common for companies to hold investments in other companies. If company A pays the dividend, then corporation tax will be paid on the profits before distribution. Company B receives these dividends and they can, in a sense, be considered the property of that company. Is it clear then that they will be excluded from the computation of profits tax for company B?

Yes.