On November 9, 2021, The Irish Department of Finance published the responses it received on its Feedback Statement on ATAD Anti-Reverse Hybrid Rule. On July 2, 2012 The Irish Department of Finance published a Feedback Statement: “ATAD Implementation - Article 9a Reverse Hybrid Mismatches” and invited interested parties to respond to this Feedback Statement.
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 July 12, 2016 and subsequently Council Directive (EU) 2017/952 (ATAD2) on May 29, 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. The Feedback Statement considers the remaining part of the rules, dealing with reverse hybrid mismatches, which must be implemented by January 1, 2022.
The Department of Finance first launched a public consultation on the implementation of the anti-hybrid rules (and the interest limitation rule) on November 14, 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 January 1, 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 January 1, 2022.
On July 2, 2021 the Department of Finance therefore published the aforementioned 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.
The Irish Ministry of Finance has now published the following responses it received:
· Consultative Committee of Accountancy Bodies Ireland (CCAB-I);
· Deloitte;
· Irish Debt Securities Association (IDSA);
· Irish Funds;
· KPMG; and
· PwC.
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