Tax
"The rules for digital platform operators had to be implemented by Member States in domestic legislation and are applicable from 1 January 2023."
TAX
Fiscal Policy
As reported in a press release by the Department of Finance, the corporation tax receipts were very strong in November, with receipts of €5 billion, up €1 billion compared with the same month last year driven by strong rise in profits for a number of multinationals based in Ireland. The Government has committed to put a portion of the receipts to a rainy day fund, however, it remains to be seen what the government plans to do with the excess.
OECD Pillar 2
The Pillar 2 Directive was agreed in December. The aim of Pillar Two is to apply a global minimum effective tax rate of 15% on the profit of the large multinational and domestic groups or companies with a combined annual turnover of at least €750 million. The draft directive maintains a proposed implementation date of 31 December 2023.
The implementation of the Pillar 2 EU Directive will incentivise many companies to restructure their operations and to move activities to jurisdictions that incorporate a tax rate of close to 15% level and instate a system of refundable tax credits.
Separately, technical work on the details is ongoing on the Pillar One proposal, which will attempt to re-allocate a proportion of tax to market jurisdictions. We do not expect to see Pillar One implemented in the near future. We note however that tax authorities are becoming more active on transfer pricing disputes with taxpayers. Irish Revenue have however increased their resources to encourage quicker resolution of disputes that come under the Mutual Agreement Procedure.
Participation Exemption
The Department of Finance has alluded that once Pillar 2 was approved, Ireland will adopt a territorial tax regime. It remains to be seen whether Ireland will adopt a limited scope territorial regime, as is common among EU Member States, or a regime with a more flexible scope, incorporating a broad participation exemption for all dividends and a branch profits exemption. A consultation on the territorial regime was launched last year, so we expect that some movement on implementing various suggestions from the stakeholders should commence in 2023.
Council Directive (EU) 2021/514 of 22 March 2021 amending Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC 7)
DAC 7 amends the existing rules (Directive 2011/16/EU) on exchange of information. It will impose new reporting obligations for digital platform operators in respect of revenues generated by sellers carrying out certain activities on digital platforms and automatic exchange of the information for tax authorities in Member States. The rules for digital platform operators had to be implemented by Member States in domestic legislation and are applicable from 1 January 2023. Finance Act 2022 includes provisions to implement the DAC 7 rules into Irish law.
"The implementation of the Pillar 2 EU Directive will incentivise many companies to restructure their operations"