Consultation
Minister Donohoe publishes Feedback Statement on ATAD interest limitation ratio
Published on
Open for submissions from
Submissions closed
Last updated on
Consultation is closed
The Minister for Finance, Paschal Donohoe T.D., has today (Friday) launched a second Feedback Statement on transposition of the ATAD interest limitation ratio.
The Anti-Tax Avoidance Directive (ATAD) requires Member States to introduce an interest limitation rule (ILR). The ATAD ILR, which is based on the recommended approach outlined in the OECD BEPS Action 4 2015 Final Report, is intended to limit base erosion through the use of interest expenses to create excessive interest deductions. The ILR is a fixed ratio rule that seeks to link a taxpayer’s allowable net borrowing costs directly to its level of earnings, by limiting the maximum net deduction to 30% of earnings before tax and before deductions for net interest expense, depreciation and amortisation (EBITDA).
Due to the complexity of the ATAD ILR and its interaction with domestic legislation, an iterative approach is being taken to developing ILR legislation. This Feedback Statement builds on the November 2018 public consultation on implementation of the ATAD Anti-Hybrid rules and ILR and the December 2020 ATAD ILR Feedback Statement. The December 2020 Feedback Statement focused on the operation of the ILR on a single company basis. This current Feedback Statement responds to the observations of stakeholders and brings forward proposed draft legislative approaches to the ILR provision as a whole, including all the group elements and exclusion options.
The views of stakeholders will be important in ensuring that Ireland’s ILR, when introduced with effect from 1 January 2022, meets the standards required under ATAD while also being clear and operable in practice and remaining consistent with Ireland’s long-standing focus on the taxation of activities with substance in Ireland.
The closing date for receipt of submissions is Monday 16th August 2021.
How to Respond
The preferred means of response is by email to ctreview@finance.gov.ie. If it is not possible to reply by email, or if you wish to make a submission both electronically and in hard copy, submissions may also be sent by post to:
ATAD Implementation
Interest Limitation Feedback Statement
Tax Division
Department of Finance
Government Buildings
Upper Merrion Street
Dublin 2, D02 R583
Please include contact details if you are responding by post.
Please also indicate whether you are contributing to the consultation process as a professional adviser, representative body, business representative or member of the public.
The consultation period will run to Monday 16th August. Any submissions received after this date may not be considered and early engagement is encouraged. Any queries or requests for clarification can be directed to ctreview@finance.gov.ie in advance of the consultation deadline.
ENDS
Notes for Editor:
As part of a process of coordinated global tax reform, EU Member States are transposing the Anti-Tax Avoidance Directive (Council Directive (EU) 2016/1164 of 12 July 2016 as amended by Council Directive (EU) 2017/952 of 29 May 2017), designed to implement three of the OECD BEPS Actions and two additional measures in a coordinated way throughout the EU.
In Ireland, work on following ATAD measures is now complete:
- Ireland’s long-standing General Anti-Abuse Rule (GAAR), in place since 1989, already met the minimum ATAD standard;
- Ireland introduced an ATAD-compliant Exit Tax in Finance Act 2018;
- Ireland implemented Controlled Foreign Company or “CFC” rules in Finance Act 2018; and
- Ireland introduced the first and most substantial part of the fourth measure, Anti-Hybrid rules, in Finance Act 2019. The second element of anti-hybrid rules, additional measures to neutralise Reverse-Hybrid mismatches, will be transposed in Finance Bill 2021 in line with the ATAD schedule and is the subject of a further Feedback Statement also published today:
The remaining ATAD Measure, an Interest Limitation Ratio (ILR) will also be transposed in Finance Bill 2021. This second Feedback Statement builds on responses to the November 2018 public consultation on implementation of the ATAD Anti-Hybrid rules and ILR and on the responses to questions in the first Feedback Statement, published in December 2020. The subsequent stakeholder engagement process highlighted the complexity of the ILR and the challenges business could face in complying with the legislative changes. The Department of Finance is therefore publishing this second feedback statement to respond to the issues raised and to put forward further potential approaches to transposing the ILR rules into Irish law.
