While the application of Pillar Two rules to US-headquartered companies remains under negotiation (see our prior updates here and here), Irish taxpayers in-scope of Pillar Two (including members of US headquartered groups) continue to have Pillar Two filing obligations in Ireland. Some of those obligations must be satisfied before the end of 2025.
In addition, changes have recently been proposed to Ireland’s Qualified Domestic Top Up Tax (“QDTT”) rules to address a glitch in the rules that has been causing administrative headaches in the context of mergers, acquisitions, new incorporations and liquidations of group entities. We have summarised that change below and provide an overview of some approaching deadlines.
Using Local Accounts – Finance Bill Amendment
Current Rules
Under existing law, when computing a group’s charge to the Irish QDTT, local accounting standards (ie, Irish GAAP or IFRS) must be used in a fiscal year where all of a group’s Irish constituent entities:
- prepare financial accounts in accordance with Irish GAAP or IFRS; and
- have identical accounting periods as the fiscal year of the consolidated financial statements of the group (the “Group Accounts”).
Where conditions (i) and (ii) are not satisfied (eg, where one or more Irish entity is dissolved during a fiscal year such that its accounting period does not match the Group Accounts), the QDTT must be computed in accordance with the accounting standards used to prepare the Group Accounts.
Proposed change
Draft legislation is currently under consideration which will update the existing QDTT rules to ensure that constituent entities located in Ireland can continue to use Irish GAAP or IFRS for QDTT calculation purposes in cases where condition (ii) above is not satisfied due to an entity being created, liquidated, dissolved or the subject of a merger, acquisition or division during the fiscal year.
This change is proposed to apply for accounting periods beginning on or after 31 December 2023.
Upcoming FY24 Pillar Two Deadlines
In-scope Irish entities must satisfy a number of registration and filing requirements with Irish Revenue using the Revenue Online Service (“ROS”). Failure to meet these requirements can result in penalties and surcharges.
The following deadlines are approaching for FY24 for in-scope entities with a 31 December year-end:
- Registration: Entities must register for Pillar Two taxes by 31 December 2025.
- QDTT group election: All entities within a QDTT group must elect to become a member of the QDTT group and appoint the QDTT group filer by 31 December 2025.
- Appointment of information return filer: One entity can be appointed as designated local entity (the “DLE”) to file a top-up tax information return, or a simplified notification of filer where another non-Irish entity in the group will file the return for the whole group, on behalf of all Irish group entities. This election must be provided by each entity by 31 December 2025.
- Information return: Entities (or the DLE) will have to submit their first top-up tax information return, or notification of filer notifying Irish Revenue which non-Irish entity in the group will file the return on behalf of the group, by 30 June 2026.
- Tax returns: Each entity’s and the QDTT group’s first Pillar Two tax return is due by 30 June 2026.
Key takeaways
The proposed amendment provides welcome pragmatism for using local accounting standards when group structures change mid-year.
In scope Irish entities must act now to meet registration and election deadlines by year-end 2025.
If you require support in relation to any Pillar Two issues, including any of those discussed above, please contact a member of Matheson’s Tax team.