Following the unanimous agreement of all EU member states on the implementation of the OECD's minimum tax proposal (Pillar Two) in December 2022, Ireland (and all EU Member States) will need to transpose the directive on the new minimum effective tax rate of 15% into national law by 31 December 2023. Ireland is expected to introduce legislation as part of this year's Finance Bill (expected to be published in October 2023) including a “Qualified Domestic Minimum Top Up Tax”. However, the 12.5% rate will remain in place for groups with revenues below the €750m threshold. Further details on the directive are included in our legislation tracker.
Ireland has already taken steps to react to these international tax changes by amending the research & development ("R&D") tax credit in the Finance Act 2022 to ensure that it will be treated as a refundable tax credit in line with the minimum tax proposals and with changes made to the US foreign tax credit regulations last year. Read more on these amendments to the R & D regime in our Matheson Insight from December 2022.
In addition to the OECD’s proposed tax reforms, many new EU tax measures are also being considered, including BEFIT, a new framework for income taxation for businesses in Europe, which aims to replace the previous proposals for a CCCTB. Further details on this framework and other proposed EU tax measures are also highlighted in our legislation tracker.
In parallel with this ongoing global tax reform, we are also seeing taxpayers facing increased scrutiny of their tax affairs, as tax authorities seek to bolster revenues, and to identify and prevent avoidance. The Matheson tax team are actively monitoring recent case law and some of these tax cases are considered as part of our InDispute series.
Irish Tax Controversy Landscape
There has been a marked increase in enquiries initiated by the Irish Revenue Commissioners (“Irish Revenue”) in recent years, with a resulting increase in the number of amended tax assessments being raised against taxpayers by Irish Revenue and cases being brought before the Tax Appeals Commission ("TAC").
The headline results for 2022 published by Irish Revenue in January 2023 states there were 427,367 audit and compliance interventions in 2022, yielding €813 million in tax. The significant number of audit and compliance interventions demonstrates Irish Revenue's growing capacity in this area and highlights the need for taxpayers to be proactively prepared for such engagements with Irish Revenue. It is also an indication that tax disputes will continue to demand the attention and resources of taxpayers in 2023 and beyond.
In our latest InDisputes Series articles, the team considers a number of recent TAC determinations and High Court cases. These cases outline the variation of cases being taken before TAC and the type of issues being raised by taxpayers in respect of assessments.
"The wide spectrum of appeals from several hundred euro to many millions encapsulates the challenge for the Commission. There is no other quasi-judicial body or even a court dealing with such a range; from the volume of the Small Claims Court to the complexity and quantum of cases in the Commercial Court, and everything in between."