The Irish Revenue has published new guidelines on the withholding tax obligations of companies paying interest on finance raised through peer-to-peer lending or crowdfunding campaigns.
Tax and Duty Manual (TDM) Part 08-03-05 had been created to provide guidance on the rules that apply under Section 246 of the Taxes Consolidation Act (TCA) 1997. It also explains the tax treatment of interest earned by a company or individual lending to companies or non-residents through peer-to-peer lending or crowdfunding.
The TDM sets out the obligations of and procedures to be followed by both the borrower and the underlying lenders.
The TDM states that, as a general rule, Section 246 TCA 1997 requires the deduction of income tax at the standard rate from annual interest paid by companies or by any person to another person whose usual place of abode is outside Ireland.
A company that pays interest on finance raised via peer-to-peer lending or crowdfunding is obligated to withhold income tax at the standard rate of tax on interest payments made on the finance raised. The underlying lenders are liable to pay income tax on any interest they earn on which withholding tax has not been suffered.