Last month the Minister for Finance Jack Chambers launched a public consultation seeking stakeholder views on the tax treatment of interest in Ireland.
This is part of a review by the Department of Finance on taxation, and deductibility, of interest by businesses in Ireland. To ensure that Ireland’s tax system is resilient, supports competitiveness, protects the tax base, and aligns with its commitments in the field of international taxation. The Department of Finance is now carrying out this public consultation with the intention of seeking stakeholder views on this topic.
Irish tax legislation includes a number of provisions allowing for the deductibility of an interest expense. In the first instance there are gateway tests which determine if there is entitlement to relief for interest. These tests generally determine entitlement based on the purpose of the borrowing. Once it is established that an interest deduction is available, rules may apply to limit the amount of that relief, i.e., the interest limitation rules. These rules were implemented as a result of, and in accordance with, the Anti-Tax Avoidance Directive, which apply an income-based deferral of interest deductibility to companies as a further measure to tackle intra-group tax avoidance practices.
The review will require a significant body of work to be carried out over a multi-year timeframe. The feedback to this consultation will inform future policy decisions, in what is a multifaceted topic.
Stakeholders are invited to:
- identify aspects of the existing interest related tax rules which pose difficulties, and outline those difficulties,
- identify aspects of existing interest related tax rules which could be simplified, and how these simplifications might be implemented,
- identify and describe any bona fide commercial scenarios where tax relief for interest expense is not currently available for businesses under existing legislation, where tax relief should be available,
- identify and explain the benefits that would be expected to flow from any new approach to the taxation and deductibility of interest, and
- identify and explain possible adverse consequences of any proposed changes.
Commenting at the launch Minister Chambers said, “Today I am pleased to launch a public consultation on Ireland’s interest regime. As announced in last year’s Budget speech, this consultation will form part of a wider review of the regime which is currently underway.
“The taxation and deductibility of interest is a complex area. This consultation is timely to ensure Ireland’s tax system remains resilient, supports competitiveness, protects the tax base, and aligns with our international commitments.
“I would encourage all interested parties to engage with this opportunity to contribute to Ireland’s tax policy to ensure that it continues to encourage investment.”
The consultation period will run to four months, ending on Thursday, 30 January 2025. Any queries or requests for clarification regarding the review can be directed to interestreview@finance.gov.ie in advance of the consultation deadline. Any submissions received after the deadline may not be considered and early engagement is encouraged.
The preferred means of response is by email to interestreview@finance.gov.ie. Receipt of email submissions will be acknowledged within two working days. If you do not receive an acknowledgement, please contact the Department of Finance to confirm receipt of your submission.
NB – This is a guide for information purposes only and does not constitute legal advice. If you have an issue requiring legal advice, please contact any of the team at Nolan Farrell & Goff LLP, whose numbers can be found on our website www.nfg.ie, or email info@nfg.ie.