Irish Dep of Finance releases P2 feedback statement: PwC

Irish Department of Finance releases Pillar Two feedback statement with draft legislation

April 2023

In brief

Ireland’s Department of Finance, on March 31, published a Pillar Two feedback statement. The statement sets forth proposed Irish legislation to implement Pillar Two, including confirmation of the intention to introduce a Qualified Domestic Top-up Tax (QDTT).

This feedback statement builds on a previous consultation process held in 2022 around implementing the EU Minimum Tax Directive in Ireland. Interested parties have until May 8, 2023 to respond as part of this process.

Action Item: The feedback statement indicates important policy decisions as to the QDTT, administration, and operation of the new tax. Pillar Two will be the biggest change to Ireland’s tax system in decades and will require close analysis by a wide range of stakeholders to manage the implementation process. The willingness of the Department of Finance to consult widely with stakeholders and practitioners is welcome, and businesses should consider responding to the specific questions asked or more generally about the proposed legislation by the May 8 deadline.

In detail

The March 31 feedback statement seeks comments on the Irish implementation of the Pillar Two rules (the ‘GloBE rules’). Ireland is required to transpose the EU Minimum Tax Directive this year such that the provisions will become effective December 31, 2023. For more details on the EU Directive that was agreed in late 2022, see our PwC Tax Policy Alert.

The consultation process

This new statement is the first of a two-step process whereby stakeholders will be asked to give feedback on the proposed implementation of the rules into Irish law. The release includes a significant amount of draft legislation across a range of areas, including calculation of GloBE Top-up Taxes, the QDTT, the Income Inclusion Rule (IIR), and Undertaxed Profits Rule (UTPR).

The second step, which we expect to be published in mid 2023, should include additional draft legislation and we expect to see more in terms of how the new rules will interact with existing Irish tax laws.

The final legislative provisions will be published as part of the Finance Bill in October 2023, and should be transposed into law in mid-to-late December 2023. The rules will be effective from December 31, 2023.

Key policy decisions

Some of the key policy decisions that the Department of Finance is indicating based on the feedback statement include:

Ireland will retain the 12.5% statutory corporation tax rate for trading companies;

Ireland considers it appropriate to introduce a QDTT for companies in scope of these rules;

The Pillar Two rules are proposed to sit outside the existing Irish corporation tax rules – this has knock-on implications for administration, including new filing and payment dates for the GloBE tax;

There will be additional registration and filing obligations imposed on all in-scope Irish Constituent Entities, separate to the filing requirements of the GloBE Information Return.

Observation: Additional clarity is needed in terms of how the existing Irish corporation tax rules will coexist with the GloBE rules or where changes may be required. We expect that such interaction matters will be opened up to wider consultation in the second feedback statement mentioned above.