On March 31, 2023, the Irish government issued a Feedback Statement on the Pillar Two Global Minimum Tax.
It includes draft legislation and outlines possible draft legislative approaches to key elements of the GloBE Rules. It is open for comments until May 8, 2023.
A second Feedback Statement is planned to be published in mid-2023, which will include more detailed draft legislation and will reflect the outcome of the consultation. The final draft legislation is planned to be included in the autumn 2023 Finance Bill.
In line with the EU Directive, the draft legislation applies an Income Inclusion Rule (IIR) from fiscal years commencing on or after 31 December 2023, and the Under-Taxed Profits Rule for fiscal years commencing on or after 31 December 2024.
As Ireland’s 12.5% trading rate of corporation tax is below the 15% global minimum rate, Ireland will also include a Qualified Domestic Minimum Top-Up Tax (QDMTT) to ensure it retains primary taxing rights. This is not included in the draft legislation, and the Feedback Statement outlines different approaches that could be taken.
Ireland has already made a number of changes to its tax incentives regimes to reflect the Pillar Two GloBE Rules, see: Irish 2022 Finance Bill Changes for Pillar Two
Unlike most other draft laws that have been published, the draft law includes many of the additional rules that have been published in the OECD Administrative Guidance.
For example:
The draft law addresses substitute loss carry forwards. This reflects Article 2.8 of the OECD Administrative Guidance that provides for the inclusion of deferred tax in the GloBE deferred tax adjustment amount for ‘Substitute Loss Carry Forwards’.
The draft law provides for the Carry-forward of Excess Negative Tax Expenses. As an alternative to incurring additional top-up tax when a domestic tax loss exceeds the GloBE loss, Article 2.7 of the OECD Administrative Guidance provides that an MNE can elect for the Excess Negative Tax Expense administrative procedure. The law implements these provisions.
The draft law applies specific provisions for Blended CFC Regimes (which reflects the OECD Administrative Guidance and includes a simplified formula to allocate CFC taxes in blended CFC regimes such as GILTI for fiscal years that begin on or before 31 December 2025 but not ending after 30 June 2027).
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The Pillar Two rules include specific rules for Joint Ventures (JVs) that would otherwise not be within the scope of Pillar Two due to not being consolidated in the financial accounts of the MNE group. However, of more interest is how the amount of top-tax tax (and by implication the amount not collected) varies depending on the JV group structure. Read more in this article.
MNE groups should pay careful attention to any group financing companies in light of the Pillar Two Rules. In this analysis we look at the impact of Pillar Two under for both general GloBE and QDMTT purposes.
On March 22, 2024, the Decree of the Ministry of Economy and Finance No. 1048, to amend the Enforcement Regulations of the International Tax Adjustment Act entered into force.
On March 22, 2024, the Enforcement Regulations to the International Tax Adjustment Act were amended. This includes attachments for the GIR (in English and Korean), the GloBE Tax Return and the Notification Form for a Foreign CE to File the GIR.
Whilst the OECD Model Rules require the application of the IIR to Low-Taxed Constituent Entities outside the jurisdiction, the Commentary permits the application of the IIR domestically (a ‘DIIR’). Both New Zealand and the EU apply a DIIR.
Analysis of the Pillar Two GloBE rules in Greece – updated for Law 5100/2024 of April 5, 2024 implementing the EU Minimum tax Directive.
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