(1) Section 107 of the Principal Act is amended by substituting the following for subsection (2):

"(2) Where the Commissioners are satisfied that a taxable gift or taxable inheritance, taken under a disposition by a donee or successor on the happening of any event, is reduced by the payment of foreign tax which is chargeable in connection with the same event under the same disposition in respect of property which is situate in any territory outside the State, they shall allow a credit in respect of that foreign tax against the gift tax or inheritance tax payable by that donee or successor on that taxable gift or taxable inheritance; but such credit shall not exceed -

(a) the amount of the gift tax or inheritance tax payable in respect of the same property by reason of such property being comprised in any taxable gift or taxable inheritance taken under that disposition on the happening of that event, or

(b) in so far as it has been paid, the amount of that foreign tax,

whichever is the lesser.".

(2) This section has effect in relation to gifts or inheritances taken on or after 1 December 2004.