Overview of Pillar Two
The OECD initiative to introduce a global minimum 15% corporate tax rate (Pillar Two) was enacted in the European Union by the Pillar Two Directive (Council Directive (EU) 2022/2523) in December 2022. EU Member States must generally transpose the Directive into their national laws by 31 December 2023.
Implementation in Ireland
On 31 March 2023, the Department of Finance published a feedback statement inviting submissions on the implementation of the Pillar Two rules in Ireland. The feedback statement seeks submissions from stakeholders under the following headings:
1. The general approach to legislation
The feedback statement:
- confirms that implementing legislation will largely follow the Directive;
- includes possible draft legislative approaches to the Directive; and
- asks stakeholders to comment on what reference (if any) should be made to the OECD model rules, commentary and administrative guidance in implementing legislation.
2. Qualifying domestic top-up tax
The Directive allows Member States to apply a domestic top-up tax to collect top-up taxes for Irish entities. The feedback statement confirms that Ireland intends to introduce a domestic top-up tax (as Ireland's 12.5% corporation tax rate is below the agreed 15% minimum effective rate).
3. Administration
The feedback statement suggests that administration of Pillar Two should be kept separate to Ireland's existing corporation tax regime. The feedback statement asks stakeholders to comment on a number of administrative issues, including:
- registration and de-registration on falling in and out of scope of the rules;
- GloBE Information Return (GIR) filings and associated notifications;
- domestic self-assessment returns to declare any top-up tax liabilities;
- payment of top-up tax liabilities;
- record keeping requirements; and
- group filings / payments.
Takeaway for clients
Matheson is engaging with the Department of Finance and industry bodies on the implementation of Pillar Two. Please contact us today to discuss any questions about the impact Pillar Two may have on your business or to provide feedback on the Department of Finance's proposals.