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      The OECD Pillar Two Global Anti-Base Erosion (GloBE) rules are now ‘live’ in Ireland.  Finance (No.2) Act 2023 introduced legislation to implement the 15% minimum tax rate under the OECD’s GloBE rules and the EU’s Minimum Tax Directive.

      Pillar Two requires a 15% minimum tax rate to apply in each jurisdiction in which an in-scope group has operations. Affected business are facing significant compliance challenges, as they seek to navigate these detailed and evolving rules which operate alongside Ireland’s existing corporation tax system.

      Cillein Barry
      Cillein Barry

      Partner

      KPMG in Ireland

      Scope

      Pillar Two will not affect the majority of Irish businesses – generally multinational and large-scale domestic groups with annual turnover exceeding €750 million in two of the last four years should fall in scope.

      Most Irish SME’s will remain unaffected by the rules, with their trading profits continuing to be subject to the headline 12.5% rate of corporation tax. The GloBE rules apply for accounting periods beginning on or after 31 December 2023 for the Irish companies of affected groups. 

      Top-up tax computation and collection

      Pillar Two is designed to achieve a global minimum effective tax rate (ETR) of 15% on a jurisdictional basis. This means that the financial information of each of the group members in any given jurisdiction must be aggregated, adjusted as required under the rules, and an ETR calculated for that jurisdiction.

      If this jurisdictional ETR is less than 15%, then top-up tax is payable to bring the ETR up to 15%. The jurisdictional basis of calculation of the top-up tax liability means that Ireland’s current approach of calculating the corporation tax liability of each company separately does not apply under the GloBE rules.

      Various mechanisms exist under Ireland’s implementation of the rules to collect top-up tax that arises in respect of a group’s Irish or foreign operations. 

      QDTT


      For most Irish operations that have an effective rate of tax of less than 15%, Ireland applies a Qualified Domestic Top-Up Tax (‘QDTT’), preserving Ireland’s primary taxing rights over these profits and ensuring that any incremental top-up tax payable with respect to Irish operations should be payable in Ireland.

      To calculate the amount of top-up tax payable under the Irish QDTT, financial accounting data must be taken from one of two sources – the data used to prepare the overall multinational group’s consolidated financial statements or the data used to prepare Irish statutory financial statements (provided certain conditions are met).

      Ireland’s implementation of the rules also includes mechanisms that would require Irish companies to pay top-up tax in Ireland with respect to foreign group members where the ETR for a particular jurisdiction is less than 15%. 

      • IIR

        An Income Inclusion Rule (‘IIR’) could apply if an Irish entity is the direct or indirect parent of such foreign group members where that tax is not otherwise collected under that particular jurisdiction’s QDTT regime. 

      • UTPR

        The Under-Taxed Profits Rule (‘UTPR’) could also apply if any top-up tax remains payable after the application of the QDTT and IIR rules, effectively acting as a backstop mechanism.

      Ireland will collect QDTT and IIR in respect of accounting periods commencing from 31 December 2023 (FY24 for calendar year groups).  However, the UTPR will not apply until one year later, for accounting periods commencing on or after 31 December 2024 (FY25 subject to certain limited exceptions).

      Safe harbours

      Recognising the significant compliance challenges facing in-scope groups, the OECD Inclusive Framework released a number of safe harbours that businesses may rely upon to remove jurisdictions from the scope of the rules where certain conditions are met.

      The Transitional Country-by-Country safe harbour is particularly relevant for FY24. It uses a group’s Country-by-Country reporting and other data to determine whether a top-up tax liability would likely arise for a jurisdiction and, if not, the group will not need to apply the GloBE rules for that jurisdiction.

      This safe harbour can substantially reduce the number of jurisdictions in respect of which complex GloBE calculations must be performed, allowing groups to focus resources on those jurisdictions most likely to incur a top-up tax liability. 

      Compliance challenges

      The scale of the challenge for businesses faced with applying the GloBE rules is highlighted in the OECD GloBE Information Return, which is the informational return that must be filed by each in-scope group each year.

      If a safe harbour does not apply, the level of information required to be disclosed as part of this filing is vastly greater than that required in Ireland’s annual corporation tax return. Rather than simply requesting foundational information needed for Revenue to assess a taxpayer’s return, the GloBE Information Return will mandate the inclusion of detailed information for each group member, covering all aspects of the GloBE Rules.

      While all data points will not be relevant to all multinational groups, the number of data points to disclose in the return each year may expand in line with the number of entities within the group and the number of jurisdictions in which the group has a presence.

      The first GloBE Information Return for in-scope groups will need to be filed within 18 months of the end of the first accounting period subject to the rules.

      For calendar year groups, the first filing deadline of 30 June 2026 is fast approaching. Thereafter, the GloBE Information Return must be filed within 15 months of the end of the relevant accounting period.

      KPMG support

      Pillar Two is a significant change in the international tax landscape, but with early planning and clear communication it can be managed effectively. KPMG Ireland can help you understand what the rules mean in practice for your organisation, build robust processes, and efficiently navigate this new compliance challenge.

      We can support you with:

      • Modelling and impact assessments

        To better understand how Pillar Two will affect your organisation

      • Roadmap and process

        To ensure the right resources are available to manage Pillar Two compliance across stakeholders outside of the tax function

      • Safe harbour impact assessments

        Review of CbCR processes and safe harbour calculation analysis.

      • Data mapping

        Identification of gaps and streamlining processes to collection the information required

      • Last mile compliance

        Ensuring applicable deadlines are met in each jurisdiction. We can also work with you to identify the most suitable tax technology tool to support your Pillar Two process (including KPMG’s BEPS Automation Tool or other tools available from third-party providers)

      • Accounting advisory support

        To understand the impact on Pillar Two on your tax reporting process and financial statement disclosures#

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          Get in touch

          The pace of change is challenging leaders like never before.

          To find out more about how KPMG perspectives and fresh thinking can help you focus on what’s next for your business or organisation, please get in touch with our BEPS team. 

          We’d be delighted to hear from you. 

          Cillein Barry
          Cillein Barry

          Partner

          KPMG in Ireland

          Orla Gavin
          Orla Gavin

          Partner, Head of Tax

          KPMG in Ireland