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Irish 2022 Finance Bill Changes for Pillar Two

The Irish Finance Bill 2022 was published on 18 October 2022 and includes some key changes to the Irish corporation tax system to take account of the Pillar Two rules.  This was subsequently enacted in the Finance Act, 2022, on December 15, 2022. 

Knowledge Development Box
 
Section 33 of the Finance Bill (Section 40 of the 2022 Finance Act) provides for amendments to the Knowledge Development Box (KDB).
 
As well as extending the KDB for a further four years (until January 1, 2027), it provides (subject to a Ministerial Commencement Order) for a new effective rate of 10% for profits within scope of the KDB. Currently, the KDB provides for a 50% reduction of qualifying income, resulting in an effective tax rate of 6.25%.
 
The Finance Bill reduces the reduction from 50% to 20% which increases the KDB effective tax rate to 10%. The aim of this is less to do with the GloBE rules in Pillar Two and more to do with the subject-to-tax rule. 

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Picture of Lee Hadnum

Lee Hadnum

Lee is a qualified Chartered Accountant and Chartered Tax Adviser. A former Senior Tax Analyst at Bloomberg Tax, Lee began his career in Ernst & Young's Entrepreneurial Services department and has 20 years of international tax planning experience. Lee's books have been recommended by The Times, The Guardian and The Telegraph.

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