Anti-Reverse Hybrid Rule – Feedback Statement Published by Finance Minister

Brian Murphy
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On 2 July 2021 the Minister for Finance, Paschal Donohoe TD, launched a Feedback Statement on the Anti-Reverse Hybrid Rule.

The first part of the anti-hybrid rules was introduced in Finance Act 2019, as required by the Anti-Tax Avoidance Directives (ATAD) and ATAD2. This Feedback Statement considers the remaining part of the rules, dealing with reverse hybrid mismatches dealt with in Article 9a of the ATAD as inserted by ATAD2, which must be implemented by 1 January 2022.

A reverse hybrid mismatch arises where an entity, referred to as a reverse hybrid entity, is treated as tax transparent in the territory in which it is established but is treated as a separate taxable person by some, or all, of its investors resulting in some, or all, of its income going untaxed. The ATAD defines a mismatch outcome as a double deduction or a deduction without inclusion whereby payments made between entities in two different territories may be deducted by each of the entities in the two territories, or, a payment deducted in one territory not being recorded as received in the other territory.

Article 9a(1) of the ATAD provides that the rule shall apply where one or more associated non-resident entities regard the hybrid entity as a taxable person resulting in a reverse hybrid mismatch arising.

The Department of Finance has published this Feedback Statement now to set out possible approaches to some of the technical aspects of the anti-reverse hybrid rule, and to invite comments on suggested definitions and appropriate usage of certain terms for incorporation into tax law and implementation of the rule from 1 January 2022. Items considered are the appropriate use of the certain terms such as “collective investment vehicle” and “widely held”. The consultation period will run to Tuesday 3rd August and Grant Thornton expects to feed into the process through various industry bodies. If you would like to know more, contact us today to discuss how we can support you with regards to anti hybrid rules and how you may be affected.

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