What is Pillar Two?
What are the Pillar Two rules?
The Minimum Tax Directive provides for a European Union (EU) wide implementation of the Organisation for Economic Co-operation and Development’s (OECD's) Pillar Two rules. The Pillar Two rules include an Income Inclusion Rule (IIR) and an Undertaxed Profits Rule (UTPR).
In addition to the IIR and UTPR, Ireland has opted to implement a domestic top-up tax. This is provided for under the Minimum Tax Directive. The Pillar Two rules provide that income of large groups is taxed at a minimum effective tax rate of 15% on a jurisdictional basis.
The legislation in Part 4A Taxes Consolidation Act 1997 (TCA 97) provides for three taxes:
- IIR top-up tax.
- UTPR top-up tax.
- domestic top-up tax.
Council Directive (EU) 2022/2523 of 15 December 2022, ensures a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the EU. This Directive was transposed into Irish law by Part 4A of the Taxes Consolidation Act 1997, and is referred to as the Minimum Tax Directive.
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