Irish Revenue on January 24, 2025, published guidance that includes updates on the tax and duty manual on controlled foreign company (CFC) rules, following amendments introduced by the Finance Act 2024. Key amendments include:
- EU list of non-cooperative jurisdictions: The guidance now incorporates the October 2024 update of the EU list of non-cooperative jurisdictions for tax purposes (read TaxNewsFlash). This list identifies jurisdictions that do not comply with international tax standards, and the updates may affect the application of CFC rules to entities located in these jurisdictions.
- Undistributed income calculation: The rules for calculating the undistributed income of a CFC have been revised. This includes the introduction of a participation exemption for certain qualifying foreign distributions, which may impact how income is attributed and taxed under the CFC regime.
- Pillar Two amendments: The guidance now includes amendments related to the OECD's Pillar Two framework, which aims to establish a global minimum tax rate. Key clarifications include:
- When a qualified domestic minimum top-up tax (QDMTT) under Pillar Two can be considered a creditable tax under CFC rules.
- Conditions under which a foreign QDMTT can be factored into the effective tax rate exemption. Specifically, if the foreign tax paid by the CFC in its jurisdiction is at least half of what the Irish corporate tax would be if the CFC were an Irish resident, then no CFC tax should be due.
Read a February 2025 report prepared by KPMG’s EU Tax Centre