BDO Ireland
Insights
2025
Feedback Statement for Phase One of reform of Ireland’s taxation regime for interest

Feedback Statement for Phase One of reform of Ireland’s taxation regime for interest

Feedback Statement for Phase One of reform of Ireland’s taxation regime for interest

On 21 November, Tánaiste and Minister for Finance, Simon Harris, published a Feedback Statement for Phase One of reform of Ireland’s taxation regime for interest.

The purpose of this Feedback Statement is to inform the development of the underlying framework for a reformed interest taxation regime and to provide stakeholders with an opportunity to share their views on proposed reforms.

A public consultation on the tax treatment of interest in Ireland was held from September 2024 to 30 January 2025. The responses highlighted a broad range of proposals to reform Ireland’s taxation regime for interest, with many stakeholders requesting that further detailed consultation take place before the introduction of legislative reforms.

Following consideration of those responses, the Department of Finance published an Action Plan for the reform of Ireland’s taxation regime for interest on 7 October 2025. The Action Plan set out a phased approach, with Phase One addressing some of the primary concerns raised by stakeholders. Additional areas for potential reform will be addressed in subsequent phases.

Finacial Services

The Phase One Feedback Statement outlines a strawman for several fundamental reforms to the current interest taxation regime. In brief, these include:

New interest deductibility rules for corporation tax include the introduction of a “profit motive” test for interest deductibility;

Retention of the section 247 regime with taxpayers allowed to elect to apply s.247 on qualifying loans instead of the new interest deductibility rules;
Extension of Transfer Pricing rules to medium-sized enterprises;
To amend the Interest Limitation Rules to introduce a group-level de minimis threshold of €6 million but also remove the current cliff-edge restriction for interest in excess of €3 million;
Alignment of tax treatment between trading and passive interest income by moving to an accruals basis of taxation for non-trading interest income; and
The application of the new interest deductibility rule to “interest equivalents”.

It is important to note that the purpose of this consultation is to set out details of how reform could operate, in order to facilitate stakeholder engagement. The proposals outlined may not be adopted in their current form, or at all, and therefore should not be relied upon as an indication of the final reforms that may ultimately be introduced in legislation.

The consultation period will run until 16 January 2026. It is anticipated that an outline of draft legislation will be published on 16 April 2026, with amended legislation to be included in the Finance Bill 2026 (effective 1 January 2027).