The Irish Revenue Commissioners released eBrief No. 289/24 on 27 November 2024, clarifying restrictions surrounding interest deductions for intercompany loans.
The update explains which subsidiary companies are no longer able to claim deductions on interest paid for loans used to acquire assets from related companies. It also addresses how these restrictions apply to income sources other than business profits, outlines the rules for deducting interest on loans taken to acquire a related company’s trade, and highlights exceptions, including loans for acquiring assets intended for leasing.
Additionally, Revenue has published a new Tax and Duty Manual – Part 36-00-19 Interest on loans to defray money applied for certain purposes, providing guidance on section 840A TCA 1997.
Section 840A restricts the ability of certain companies (referred to as “investing companies” in this section) to claim a deduction for interest payable on certain connected party borrowings to fund the acquisition of certain assets from other group companies. In general, section 840A provides that in computing the amount of the profits or gains to be charged to corporation tax under Schedule D, no deduction is available for investing companies in respect of any interest payable on loans—
- For the acquisition of assets from a company connected with the investing company,
- ·Where the loan is made to the investing company by a person who is connected with the investing company. For the purposes of section 840A, section 10 TCA 1997 is applied to establish whether persons are connected.
Consequently, “control”, as used for determining connected person, is to be construed in accordance with section 4321. Section 840A (2)(b) provides that interest on any form of refinancing such a loan is similarly not deductible.
