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Ireland launches ATAD implementation consultation on Hybrids and Interest Limitation

Ireland launches ATAD implementation consultation

Hybrids and Interest Limitation

On 14 November 2018, the Irish Government launched a consultation (PDF, 942KB) on its adoption of measures under the European Union (EU) Anti-Tax Avoidance Directive (ATAD). The consultation relates to Ireland’s adoption of measures to counteract cross border hybrid mismatches as well as matters to consider when Ireland moves to adopt a general interest limitation rule.

Like other EU Member States, Ireland has committed to adopt a number of measures under ATAD which are designed to protect tax revenues from base erosion. These include measures to counteract tax outcomes which exploit differences in the character and tax treatment of financial instruments and legal entities to result in tax deductions in one jurisdiction with no income taxed in another jurisdiction as well as double deductions for the same payments. Member States agreed to adopt measures to counteract these outcomes in 2017. They are to be adopted no later than 1 January 2020 with measures targeting reverse hybrid structures to be adopted no later than 1 January 2022. Ireland is consulting now with a view to getting feedback from stakeholders on these complex measures and the manner in which they should be adopted into Ireland’s existing tax regime. The measures are to be included in Finance Bill 2019.

In tandem, the consultation also considers questions relating to the general interest limitation rule under ATAD. This rule requires EU Member States to limit deductions for net borrowing costs to 30% of a taxpayer’s earnings before interest, tax, depreciation and amortisation deductions (EBITDA). Ireland considers that it has appropriate targeted avoidance measures which afford equivalent protection from base erosion due to finance expense deductions which could potentially allow it to defer adoption of the interest limitation rule until 1 January 2024, at the latest. Ireland is nonetheless seeking feedback on the interest limitation rule in order to understand better its impact for Irish taxpayers and to understand how the operation of this rule might interact with the hybrid mismatch measures as well as other measures under Ireland’s law.

Click here to read KPMG’s On a Page Summary (PDF, 153.4KB) of the questions raised in the consultation and what businesses should do in considering the measures and their impact on them.

KPMG plans to respond to this detailed and technical consultation (PDF, 942KB).

If you are concerned about the impact of these measures on your business, please get in touch with your usual KPMG contact and provide your feedback and have your voice heard as part of our consultation response. The consultation closes on 18 January 2019.