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Qualified Domestic Minimum Top-up Taxes, the likely mechanism for Ireland’s corporation tax top-up regime

Tatiana Kelly, Senior Manager, Tax Technical & Policy Centre

Following a recent major update from the OECD on its GloBE rules Tatiana Kelly analyses the latest guidance around Qualified Domestic Minimum Top-up Taxes and how they should be applied. The introduction of such rules is optional, and will likely only make sense for low tax jurisdictions and she writes that while a decision has not yet been announced that Ireland is highly likely to opt to do so.


A qualifying domestic top-up tax is defined in Article 10 of the OECD Model Rules. It means a minimum tax that is included in the domestic law of a jurisdiction and that:

  • calculates the excess profits of constituent entities located in the jurisdiction in a way that is equivalent to the GloBE Rules;
  • increases the domestic tax liability to the minimum rate on the domestic excess profits for a fiscal year; and
  • is implemented and administered in a way that is consistent with the GloBE Rules and the Commentary.

On 2 February 2023, the OECD released the Administrative Guidance (Guidance). Its publication followed the release of the Pillar Two Model Rules in December 2021 and a Commentary in March 2022, as well as rules for safe harbors and penalty relief released in December 2022. The guidance was agreed by consensus of all 142 countries and jurisdictions in the OECD/G20 inclusive framework. It forms part of the implementation framework under which countries are not required to adopt the GloBE rules but, if they choose to do so, they agree to implement and administer the rules in a way that is consistent with the outcomes provided for under the Pillar Two Model Rules and any subsequent guidance agreed by the inclusive framework.

Key takeaways from the Administrative Guidance on QDMTT

A QDMTT need not follow the detailed rules applicable to the IIR and the UTPR described in the Model Rules and related Commentary, but a QDMTT must be implemented and administered in a way that is consistent with the agreed outcomes provided for under the GloBE rules. The Guidance contains further guidance on QDMTTs to assist tax administrations in determining whether a minimum tax will be recognised and respected as a QDMTT. Specifically, with respect to each chapter of the Model Rules, the Guidance identifies the degree to which a QDMTT must conform to or can vary from the requirements of such chapter. For example, whereas only companies with more than €750 million of turnover are in scope under the model rules, a QDMTT can apply to companies with less revenue, but the threshold cannot be set above €750 million.

A number of rules with respect to QDMTTs are worthy of note:

  • Article 4.3.2(c) of the Model Rules provides that covered taxes included in the financial accounts of a constituent entity’s direct or indirect constituent entity-owners under a CFC tax regime are allocated to the constituent entity that earned the income giving rise to the CFC inclusion. This rule is turned off for purposes of the QDMTT, with the effect that the QDMTT jurisdiction has the primary right to tax income under the QDMTT arising in its jurisdiction.
  • A QDMTT should contain safe harbours that align with the safe harbours agreed under the GloBE rules, including the transitional CbC safe harbours contained in the December 2022 Guidance.
  • A QDMTT need not contain a “Substance-Based Income Exclusion” (“SBIE”) based on payroll and assets in a jurisdiction but, if it does include one, it cannot be more generous (but can be less generous) than the SBIE in the model rules.

Under the model rules, a QDMTT results in a credit against either an IIR or a UTPR. In certain circumstances a credit resulting from the application of the QDMTT may eliminate any further top-up tax under an IIR or a UTPR. That may not always be the case, due in part, for example, to the fact that a QDMTT may be determined by reference to a local financial accounting standard, as opposed to the financial accounting standard of the ultimate parent entity. The administrative guidance explains that the inclusive framework will undertake further work on developing a QDMTT safe harbour, the effect of which would be to eliminate any residual IIR or UTPR when the QDMTT safe harbour applies.

What's next

The Guidance will be incorporated into a revised version of the Commentary that will be released later this year (2023) (and will replace the original version of the Commentary issued in March 2022). The examples included in the Administrative Guidance will be incorporated into a revised set of detailed examples that will be released alongside the revised Commentary. The Inclusive Framework will continue to consider Administrative Guidance priorities on an ongoing basis, where more clarity is required, with the aim of releasing guidance throughout the year, as soon as it is agreed, so that the Inclusive Framework members can meet their implementation schedule.


Countries have the option to adopt a QDMTT in order to meet the required 15% minimum effective tax rate and they need to elect into the QDMTT regime. For example, high taxed countries may decide not to implement a QDMTT, as a QDMTT may only increase the administrative burden without necessarily resulting in any additioWnal tax take. Ireland has not announced to date whether it will elect into the QDMTT regime. However, as our 12.5% trading rate of corporation tax is below the agreed 15% minimum effective rate, it is very likely that Ireland will elect in.

Please note this article first featured in the Irish Tax Monitor in April 2023 and was re-published kindly with their permission on our website.

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