Consultation
Minister Donohoe publishes Feedback Statement on Anti-Reverse Hybrid Rule
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The Minister for Finance, Paschal Donohoe TD, has today (Friday) launched a Feedback Statement on the Anti-Reverse Hybrid Rule.
In order to lay down rules against tax avoidance practices that directly affect the functioning of the internal market, the EU passed Council Directive (EU) 2016/1164 (the Anti-Tax Avoidance Directive or ATAD) on 12 July 2016 and subsequently Council Directive (EU) 2017/952 (ATAD2) on 29 May 2017.
The anti-hybrid rules are largely contained in ATAD2, which extended the basic anti-hybrid provisions of the first ATAD and extended the scope of those provisions to include mismatches involving third countries.
Broadly, the anti-hybrid rules are aimed at preventing taxpayers from engaging in tax system arbitrage. The provisions seek to neutralise tax advantages, or mismatch outcomes, that arise due to arrangements that exploit differences in the tax treatment of an instrument or entity arising from the way in which that instrument or entity is characterised under the tax laws of two or more territories.
The first and most substantial part of the anti-hybrid rules was introduced in Finance Act 2019, as required by ATAD2. This Feedback Statement considers the remaining part of the rules, dealing with reverse hybrid mismatches, which must be implemented by 1 January 2022.
The Department of Finance first launched a public consultation on the implementation of the anti-hybrid rules (and the interest limitation rule) on 14 November 2018. While many of the submissions focused on the technical nature of the first part of the anti-hybrid rules, due to their earlier implementation date of 1 January 2020, it was a common request that the Department consult with stakeholders at a later date regarding reverse hybrid mismatches to enable taxpayers to understand how that rule will operate from 1 January 2022.
The Department is therefore publishing this Feedback Statement to respond to the views expressed in responses to the public consultation of 2018 and to set out possible approaches to some of the technical aspects of the anti-reverse hybrid rule.
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
Reverse Hybrid Mismatches Feedback
Tax Division
Department of Finance
Government Buildings
Upper Merrion Street
Dublin 2, D02 R583
The consultation period will run to Tuesday 3rd 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 Editors
Responses to this consultation are subject to the provisions of the Freedom of Information Act 2014. Parties should also note that responses to the consultation may be published on the Department of Finance’s website.
The Department of Finance will carefully consider the responses to this Feedback Statement and may invite key stakeholders to meet with them and with Revenue officials, by video conference or in person as appropriate under public health guidelines, in advance of the introduction of the reverse hybrid mismatch rule in Finance Bill 2021 with an effective date of 1 January 2022.
