Consultation on the Tax Treatment of Interest

PwC’s submission responds to the Department of Finance’s consultation on Ireland’s tax treatment of interest and argues for a comprehensive simplification and overhaul of the regime to enhance competitiveness, certainty and alignment with international best practice.

PwC contends that Ireland’s interest deductibility rules have become excessively complex due to layered domestic provisions and the addition of EU ATAD Interest Limitation Rules (ILR), which now impede bona fide commercial activity, particularly intra‑group financing for acquisitions and reorganisations. Our submission calls for a move away from piecemeal tweaks towards a principled, purpose‑driven framework where interest is prima facie deductible in genuine commercial situations.

The submission proposes repealing Sections 247 and 249 TCA 1997 and replacing them with a simpler regime, phased in via transitional rules and confined to bona fide commercial scenarios. It further recommends moving from dual rates on interest (trading vs non‑trading) to a single 12.5% corporate rate to improve simplicity and competitiveness. Additional streamlining includes simplifying ILR mechanics, removing duplication with anti‑hybrid and Pillar Two rules, and clarifying order of application with transfer pricing.

PwC argues that BEPS Action 4, ATAD ILR, expanded transfer pricing, anti‑hybrid rules and Pillar Two’s 15% minimum tax now provide ample anti‑avoidance protection, reducing the need for legacy restrictions.