Taxes Consolidation Act 1997 section 739LAA

Profit: financing cost ratio from 1 January 2020

Section 739LAA restricts the amount of interest and financing costs that an Irish real estate fund (IREF) can deduct against its profits, applying a modified version of the rules in section 739LA from 1 January 2020 onwards.

• Where an IREF's total specified debt exceeds 50 per cent of the relevant cost of its assets, a portion of its property financing costs is treated as deemed income taxable under Case IV of Schedule D, calculated by the formula A × B/C (where A is property financing costs, B is the excess debt, and C is total specified debt).
• A second restriction applies where the property financing costs ratio falls below 1.25:1 — the IREF is treated as receiving additional deemed income equal to the amount by which the adjusted property financing costs would need to be reduced to bring the ratio to 1.25:1; if the sum of profits and adjusted costs is zero or negative, the entire adjusted property financing costs become deemed income.
• The deemed income amounts are charged to income tax under Case IV of Schedule D for the year of assessment in which the relevant accounting period ends, and no losses, deficits, expenses, or allowances may be set off against them.
• The section applies to accounting periods beginning on or after 1 January 2020; where an accounting period straddles that date, it is split into two separate periods at 31 December 2019 / 1 January 2020.