As follow-up to its public consultation of May 2022, on March 31, 2023 the Irish Department of Finance launched a Feedback Statement on the transposition of the EU Minimum Tax Directive (the Pillar Two Directive). The consultation period will run to close of business on Monday May 8, 2023. Considering the role that Irish entities play in many international structures, it is certainly worth taking notice of the legislative approach to implement the EU Minimum Tax Directive as proposed by the Irish Department of Finance.

Pillar Two primarily consists of two interlocking rules, together referred to as the Global anti-Base Erosion (GloBE) rules. These rules, as reflected within the EU in the Pillar Two Directive, require Member States to introduce a global minimum effective tax rate of 15% for corporate groups with annual global turnover of at least €750 million. This minimum rate will apply in each jurisdiction in which the group operates and will be calculated on an adjusted accounting measure of profit.

The aforementioned EU Minimum Tax Directive largely represents a direct transposition of the OECD GloBE Model Rules, with a number of amendments to ensure compatibility with EU law or to deal with certain operational matters. The main additional provisions in the Directive are:

• The extension of the GloBE rules to include large scale, purely domestic groups, so as not to contravene the EU fundamental freedoms.
• The Directive makes it mandatory for Member States to apply the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR). By contrast, jurisdictions could sign up to the OECD agreement on the basis that they themselves would not implement the GloBE rules domestically but would not object to their application on companies within their borders by other jurisdictions.
• A requirement for a Member State to apply the IIR to apply it not only to foreign subsidiaries but also to all domestic constituent entities, which is permitted but not mandatory under the GloBE Model Rules.

The Feedback Statement brings forward possible draft legislative approaches to key elements of the GloBE rules and outlines possible approaches that could be taken in respect of the Qualified Domestic Top-up Tax (QDTT) and administrative requirements such as registration, self-assessment, filing of returns, payments and record-keeping.

This Feedback Statement builds on the May 2022 Public Consultation on Pillar Two implementation. According to the Irish Department of Finance most respondents noted the complexity of Pillar Two and proposed that to enable companies to comply with the new requirements when implemented, further detailed consultation would take place during the development of the relevant legislation.

This Feedback Statement brings forward possible draft legislative approaches to key elements of the Directive and outlines possible approaches that could be taken in respect of the QDTT and administration. Consultation questions are posed on a range of technical and policy issues. The Department of Finance states that it is intended that this will allow the draft legislative approach to be tested by stakeholders, to identify any potential uncertainties or unintended consequences to be resolved, and also to inform preparations being made by businesses to enable compliance with the rules when they come into force from December 31, 2023.

The Finance Department states that the views of stakeholders are important in ensuring that Ireland’s legislation to transpose the Directive will, when introduced, be clearly understood and operable in practice, while also meeting the international standards required.

Interested stakeholders are therefore invited to:

• Give your views on the specific questions set out in the Feedback Statement.
• Provide numerical examples where possible to illustrate one’s points.
• Provide details of alternative approaches that one feel might be beneficial (including minor suggestions).
• Where appropriate, estimate any Exchequer cost/yield of your preferred option.
• Provide details of relevant issues not covered in the Feedback Statement.

Where possible, when providing feedback stakeholders are asked to structure their responses in a similar manner to that followed for the purpose of this Feedback Statement, namely:

1.  General approach to legislation

Section 2 and Appendix 1 of the Feedback Statement outline the possible draft legislative approaches to the Directive.

2.1  Transposition of EU Minimum Tax Directive

2.2  OECD Model Rules, Commentary and Administrative Guidance

2.  QDTT

Section 3 of the Feedback Statement outlines the possible approach to implementation of a QDTT.

3.  Administration

Section 4 of the Feedback Statement considers the administration aspects of the Directive and the possible approaches to same.

4.1  Proposed approach to administration

4.2  Registration and De-Registration

4.3  Filing of GloBE Information Returns and Notifications

4.4  Filing of Domestic Returns / Self-Assessment

4.5  Payments

4.6  Record Keeping

4.7  Other Administration Provisions

4.8  Group Filings / Payments

4.  Other issues

Views are sought on any issues relevant to the Directive not specifically covered in this Feedback Statement.

Here you can find the Feedback Statement containing a proposed legislative approach to implement the EU Minimum Tax Directive as Annex 1.

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