What is Pillar Two?
What are the Pillar Two rules?
Council Directive (EU) 2022/2523 of 14 December 2022 (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 profits of large groups is taxed at a minimum effective tax rate of 15% on a jurisdictional basis.
The Minimum Tax Directive was transposed into Irish law by Part 4A Taxes Consolidation Act 1997 (TCA 97).
The legislation in Part 4A (TCA 97) provides for three taxes:
- IIR top-up tax.
- UTPR top-up tax.
- Domestic top-up tax.
Next: What is the IIR top-up tax?