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Amendment of Part 35C of Principal Act (hybrid mismatches)
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21. (1) Section 835AA of the Principal Act is amended—
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(a) in subsection (2) —
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(i) by substituting the following for paragraph (e):
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“(e) where—
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(i) both enterprises are entities,
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(ii) one enterprise (which is other than a non-consolidating entity) is included in the same consolidated financial statements as the other enterprise, and
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(iii) the consolidated financial statements referred to in subparagraph (ii) are prepared under—
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(I) international accounting standards, or
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(II) Irish generally accepted accounting practice,”,
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and
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(ii) by substituting the following for paragraph (f):
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“(f) where—
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(i) both enterprises are entities, and
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(ii) one enterprise (which is other than a non-consolidating entity)—
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(I) is—
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(A) not included in consolidated financial statements, or
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(B) included in consolidated financial statements prepared other than under an accounting practice referred to in paragraph (e),
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and
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(II) would, if consolidated financial statements were prepared under the accounting practice referred to in paragraph (e)(iii)(I), be included in the same consolidated financial statements as the other enterprise,”,
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(b) in subsection (6), by substituting “Subject to subsection (7), references in this Part” for “References in this Part”, and
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(c) by inserting the following subsection after subsection (6):
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“(7) References in this Part to a transaction between associated enterprises shall not include a reference to a transaction between enterprises who were associated enterprises at the time the transaction was entered into or formed, but are neither—
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(a) associated enterprises at the time the payment arises under the transaction, nor
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(b) associated enterprises at the time a deduction in respect of the payment referred to in paragraph (a) arises,
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and it is reasonable to consider that the arrangement as a result of which those enterprises ceased to be associated enterprises was entered into for bona fide commercial reasons and does not form part of any arrangement of which the main purpose, or one of the main purposes, is to avoid the application of this Part.”.
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(2) Section 835AB of the Principal Act is amended—
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(a) in subsection (1) —
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(i) in paragraph (c), by deleting “or”,
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(ii) in paragraph (d), by substituting “two or more such hybrid entities, or” for “two or more such hybrid entities,”, and
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(iii) by inserting the following paragraph after paragraph (d):
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“(e) where the entity is an entity on which a controlled foreign company charge or foreign company charge is made in respect of two or more hybrid entities, two or more such hybrid entities,”,
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and
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(b) in subsection (3) —
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(i) in subparagraph (i), by deleting “or”,
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(ii) in subparagraph (ii), by substituting “two or more such hybrid entities, or” for “two or more such hybrid entities,”, and
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(iii) by inserting the following subparagraph after subparagraph (ii):
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“(iii) where the entity referred to in subsection (1) is an entity on which a controlled foreign company charge or foreign company charge is made in respect of two or more hybrid entities, two or more such hybrid entities,”.
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(3) Section 835AL of the Principal Act is amended—
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(a) in subsection (1), by substituting “Subject to subsection (1A), a payment to a hybrid entity” for “A payment to a hybrid entity”, and
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(b) by inserting the following subsection after subsection (1):
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“(1A) A payment to a hybrid entity deduction without inclusion mismatch outcome shall not arise under subsection (1) in respect of a payment to a hybrid entity where the participator is an entity that, under the laws of the territory in which it is established, is exempt from tax which generally applies to profits or gains in that territory.”.
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