Taxes Consolidation Act 1997 section 835AVD

Reverse hybrid mismatch outcome

Section 835AVD defines a reverse hybrid mismatch outcome, sets out the circumstances in which such an outcome does not arise, and explains how the mismatch is neutralised by charging the untaxed profits to corporation tax.

• A reverse hybrid mismatch outcome arises where profits of a reverse hybrid entity attributable to a relevant participator are subject to neither Irish nor foreign tax, but does not arise where the participator is tax-exempt, is in a zero-tax territory, or is in a territory with a territorial tax system.
• The mismatch is neutralised by charging the untaxed profits to corporation tax as if the reverse hybrid entity were an Irish-resident company, subject to any applicable double tax treaty provisions which take priority.
• The reverse hybrid entity may appropriate or cancel units (or partnership interests) of the relevant participator to meet the resulting tax liability, and the participator must allow this at the end of the relevant tax period.
• For a common contractual fund the management company fulfils the tax obligations (without personal liability), and for a partnership the precedent partner fulfils them on behalf of the partnership.