Paschal Donohoe (Dublin Central, Fine Gael)

I move amendment No. 79:

In page 119, line 16, to delete “OECD (2025)” and substitute “the document entitled OECD (2025)”.

Amendments Nos. 79 to 82, inclusive, are Government amendments to section 92 of the Bill. Section 92 of the Bill provides for amendments to Part 4A of the Taxes Consolidation Act 1997 which transposed the EU minimum effective tax directive into Irish law and is referred to as Ireland’s pillar 2 legislation. Committee members will be aware that Part 4A is a very sizeable section of the Taxes Consolidation Act 1997 containing detailed technical provisions as to the operation of the pillar 2 rules in Ireland.

The purpose of this amendment is to address some practical difficulties that have been identified in the application of the domestic top-up tax provisions. The rules regarding the calculation of domestic top-up tax generally provide that a local financial accounting standard is to be used. However, in certain circumstances, including where the fiscal year of one or more local entities is not aligned with the fiscal year of its ultimate parent entity, the qualified domestic top-up must be calculated using the accounting standard used in the preparation of the consolidated financial statements of the ultimate parent entity.

Concerns regarding the practical difficulties of this rule for taxpayers were identified during the transposition of legislation and have been raised with the OECD by both taxpayers and a number of jurisdictions, including Ireland. Certain normal business transactions, such as the creation or wind-up of a group company or a merger acquisition, could temporarily result in the group having one or more entities with a different fiscal year, and therefore require the calculation of the QDTT under parent accounting standards. However, in a subsequent year where no such activity occurred, the taxpayer would be required to use local accounting standards again. Pillar 2 does not include rules for how to manage such repeated transitions between accounting standards, therefore the issue has the potential to add significant complexity.

It is expected that administrative guidance will be agreed at the OECD to deal with these difficulties, and initial work has been undertaken on the issues. However, due to the significant workload at the OECD and the focus this year on other pressing issues, the guidance has not yet been agreed. Therefore, in the interests of providing certainty for taxpayers in the interim, and noting that the first top-up tax filing and payment obligations arise in June of next year, it is proposed to amend the rules such that a group will continue to calculate their QDTT liability using local financial accounting standards notwithstanding that one or more group entity’s fiscal year is not aligned with the fiscal year of its ultimate parent entity, in very specific circumstances. Those are with regard to company formations, liquidations, strike offs or wind-ups; a domestic or cross-border mergers or acquisitions; and the creation, or closure of a permanent establishment.

The remaining amendments which I am proposing to this section are all minor technical amendments, to ensure the correct operation of the legislation as intended. If it would be of assistance to the committee in discussing these amendments, it has been suggested to me that I could read the note outlining the provisions contained in section 92 of the Bill as published. Perhaps if Deputies are amenable to it, I can issue the note to them before Report Stage. Honestly, if I was to read this full note out, we would be here for some time.