On 2 July 2021, the Finance Minister, Paschal Donohoe TD, launched a Feedback Statement on the Anti-reverse hybrid rule.

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. This Feedback Statement considers the remaining part of the rules, dealing with anti-hybrid mismatches, which must be implemented by 1 January 2022.

The Department of Finance first launched a public consultation on the implementation of the anti-hybrid rules (and the interest limitation rule) on 14 November 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 1 January 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 1 January 2022.

The Department is therefore publishing this 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.