A Review of Ireland’s Draft Pillar Two Law

Overview

On October 19, 2023, the Irish Ministry of Finance released the Finance (No. 2) Bill 2023 (‘draft law’). This inserts a new Part 4A into the Taxes Consolidation Act, 1997 to implement the Pillar Two GloBE rules/EU Minimum Tax Directive. As provided in the EU Directive, the draft law includes an income inclusion rule (IIR) and an under-taxed profits rule (UTPR). 

The IIR is to apply to financial years beginning on or after December 31, 2023. The UTPR will generally apply to financial years beginning on or after December 31, 2024.

The draft law provides for the comprehensive implementation of the GloBE Rules and follows two previous Feedback Statements (July, 2023 and March, 2023).

Section 111AAE of the draft law provides that Ireland will apply a domestic minimum top-up tax (intended to be a QDMTT) for financial years beginning on or after December 31, 2023.

The draft law specifically provides that for the purpose of calculating and administering the GloBE rules in Ireland the domestic law is to be construed so as to ensure, as far as practicable, consistency with the OECD Model Rules and OECD guidance providing it is not inconsistent with the EU Directive.

The OECD guidance is comprehensively detailed in the draft law (including the OECD Commentary, Safe Harbours and Penalty Relief Guidance, February and July 2023 Administrative Guidance, Examples and the GIR Guidance.

Further guidance issued by the OECD can also be include as ‘OECD guidance’ for this purpose by an Order of the Minister of Finance.

Safe Harbours included in the draft law include the Transitional CbCR Safe Harbour, Transitional UTPR Safe Harbour, QDMTT Safe Harbour and the Simplified Reporting Safe Harbour. The Non-Material Constituent Entity Safe Harbour/Election is not currently included. 

General