Phase One of Reform of Interest Regime - PwC Response

PwC responds to the Department of Finance’s Feedback Statement on reforming Ireland’s interest regime, welcoming the review and its objective of safeguarding Ireland’s competitiveness through simplification. However, it concludes that the strawman proposal, as drafted, risks adding complexity without delivering genuine administrative certainty or competitive enhancement.

PwC’s overarching position is that the proposal does not significantly change the current regime and could in fact create new areas of uncertainty, such that maintaining the status quo could be less harmful to competitiveness than implementing the strawman measures. 

Key issues include:

• The proposed new interest deductibility rule, including the introduction of a “profit motive” test, does not simplify the basis for claiming an interest deduction. The interpretation of a “profit motive” test is subjective, with a very limited body of relevant case law or experience to rely on. Annual testing of “intention” and evidencing “purpose” is likely to be onerous, adding complexity versus the status quo.

• A move to taxing non‑trading interest under Case III/IV on an accruals basis fails to take account of other expenses and offers no practical simplification, while risking detrimental commercial outcomes.

• The removal of the need for cash to pass in certain restrictive circumstances (as part of claiming relief under Section 247 TCA 1997) does not represent meaningful reform.

• Extending transfer pricing to SMEs at the same time as introducing a new deductibility regime could significantly increase compliance burdens. 

Our submission maintains that existing ATAD measures (anti‑hybrid rules and the interest limitation rules), transfer pricing, and Pillar Two already provide sufficient protection, creating an opportunity to simplify rather than complicate the interest regime.