Revenue Note for Guidance
This section sets out the rules for determining the relevant profit, or loss, of a relevant entity.
(1) Introduces the definition of a relevant profit for the purposes of the interest limitation rules. This is an important concept as it is the starting point for the calculation of EBITDA, upon which any interest limitation will be based. The definition refers to an amount of profits on which corporation tax falls finally to be borne, which in accordance with section 4 Taxes Consolidation Act 1997, is a reference to the amount of those profits after making all deductions and giving all reliefs that for the purposes of corporation tax are made or given from or against those profits, including deductions and reliefs which under any provision are treated as reducing them for those purposes. That amount of profits is then adjusted to include gains or losses on development land, relief for excess trade charges on a value basis and relief for trading losses on a value basis, which may have been claimed but for this Part.
(2) In calculating the relevant profit, each element of the calculation that is taxable or deductible at the 25% rate is grossed up such that it gives the same result were the amount taxable or deductible at the 12.5% rate. This is necessary as, to calculate EBITDA and the interest limitation, amounts are required that have comparable values when considering Ireland’s different tax rates.
(3) This subsection provides for the grossing up of amounts of charges, income, expense, gain or loss, included in the calculation of relevant profit or loss which are subject to tax, or relieved, at the CGT rate as defined in section 835AY.
(4) In calculating the relevant profit, no account is to be taken of losses or excesses carried forward (under sections 396(1), 399(1) and 399(2)) or back (under sections 396(2), 396A(3), 396B(3), 397(1) and 399(2)) from other accounting periods or amounts claimed or surrendered under group relief (under section 420 or 420A), with the exception of interest treated as a charge on income that would be surrendered under section 420(6), i.e. interest which is deductible against total profits is to be taken into account in the relevant profit or loss of the claimant company which would take the deduction for that interest but for this Part.
(5) Provides an exclusion of income or expenses (including interest) directly connected with qualifying long-term infrastructure projects from the calculation of relevant profit or loss.
(6) Where a relevant entity carries on both a qualifying long-term infrastructure project and activities that do not fall within the definition, the income and expenses of the relevant entity are apportioned between the activities on a just and reasonable basis.
(7) This paragraph provides that a relevant loss is to be calculated in the same manner as a relevant profit and a reference to the amount of profits on which corporation tax falls finally to be borne is read as a reference to an amount of loss arising after all reliefs and deductions for the purposes of corporation tax.
Relevant Date: Finance Act 2021