Global Tax Developments

New measures not announced in Budget 2025

Finance (No. 2) Act 2023 saw the introduction of the Pillar Two (Global Minimum Tax) into Irish legislation for accounting periods beginning on or after 31 December 2023. Pillar Two was first introduced at OECD level via the OECD Model Rules in December 2021. Since then, there have been a number of commentary publications issued by the OECD. Finance Bill 2024 seeks to include the commentary published by the OECD in December 2023 and June 2024 in Irish legislation. The amendments include changes to the transitional CbCR safe harbour, including anti-avoidance provisions with respect to “hybrid arbitrage arrangements” (entered into after 15 December 2022). In addition provision is made for rules to be used by eligible groups for non-material constituent entities under the “Simplified Calculations Safe Harbour”.

Amendments were also made with respect to the application of certain rules relating to deferred tax and providing for the allocation of certain covered taxes to a constituent entity that is a hybrid entity or a reverse hybrid entity, and to allow for an election to exclude the allocation of certain deferred tax expenses to a jurisdiction. Further, provision is made for the domestic top-up tax treatment in respect of a securitisation entity. For further detail please see our Financial Services analysis. 

In addition, Finance Bill 2024 seeks to provide clarity to existing Pillar Two legislation regarding the order of utilisation when determining the total deferred tax adjustment amount for a fiscal year in relation to a loss deferred tax asset. Also certain standalone investment undertakings shall not be chargeable to the domestic top-up tax.

What was unexpected?

While it was expected that the OECD commentary published in December 2023 and June 2024 would be legislated for as part of Finance Bill 2024, certain elements of the legislation have retrospective effect. We have highlighted topical retrospective insertions included in Finance Bill 2024 below.

Who will be affected?

Multinational groups with a presence in Ireland within the scope of Pillar Two.

When? What to do now?

As detailed previously, the Finance Bill seeks to introduce certain OECD commentary (published in December 2023 and June 2024) into Irish legislation. Finance Bill 2024 specifically provides for certain amendments to the Irish Pillar Two legislation that apply for accounting periods beginning on or after 31 December 2023 (i.e. the first accounting periods in which Pillar Two has been adopted), some examples of which are:

• The insertion of ‘Simplified calculations safe harbour’ (applicable to ‘non-material constituent entities’); and
• Certain amendments regarding specified return dates and registration notification dates.
  

Our view
 

In-scope groups (for Pillar Two purposes) should consider the legislation brought about to deal with the application of OECD commentary (inclusive of those published in December 2023 and June 2024) and continue to consider the application of OECD commentary generally. Particular care should be given to those provisions introduced in Finance Bill 2024 that seek to be implemented for accounting periods beginning on or after 31 December 2023. Consideration should also be given to certain provisions such as purchase price accounting (which requires review of Country-by-Country Reports for fiscal years beginning on or after 31 December 2022) and hybrid arbitrage arrangements (which require the review of hybrid arbitrage arrangements meeting certain criteria that were entered into after 15 December 2022).

It is notable that the Pillar Two legislation, both in Ireland and across the globe, continues to be subject to change. In-scope groups should continue to monitor Pillar Two developments post-Finance Bill 2024 and monitor the publication of guidance and / or Tax and Duty Manuals published by Revenue.