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Ireland agrees to sign up to the OECD Inclusive Framework political agreement on the OECD two-pillar approach

Ireland will sign up to the OECD Inclusive Framework political agreement on the two-pillar approach, following approval by the Irish Cabinet. The move was announced by the Irish Finance Minister, Paschal Donohoe, describing it as "a difficult and complex decision but… the right one". It came on the eve of the OECD Inclusive Framework meeting concerning the two-pillar measures and the ambitious timeframe for implementation.

The Irish decision follows acceptance at OECD level of Ireland's insistence on clarity on the minimum effective tax rate under the proposed Pillar 2 measure. That rate has now been set at 15%, allaying Ireland's concerns with the previous OECD position of a minimum tax rate of "at least 15%". That could have facilitated a higher rate ultimately being settled on, something that was being pushed by some influential countries. Comfort at EU level has also been obtained. In his lengthy published statement announcing the decision, the Irish Finance Minister confirmed recent Irish media reports that Ireland has received assurances from the EU Commission that, when it comes to transposing the OECD agreement into Member State national law, the Commission will not seek to "gold plate" the OECD agreed position by seeking to go beyond the international consensus.

Ireland's holding out on signing the political agreement reached in July and its continued negotiation since then around ensuring certainty on the minimum effective rate now appears to be well justified. Indeed, predictability and certainty for the Irish government, business and investors is a key theme in the Minister's published statement. Additional reasons given for the change in the Irish position include the importance of staying in line with key international accords, particularly one likely to have the support of around 140 countries, and the need for Ireland to continue to have influence in respect of the critical upcoming discussions around the implementation of the proposed measures.

While Ireland has agreed to the 15% minimum rate, the announcement expressly states that Ireland will retain its long standing statutory 12.5% corporation tax rate for businesses with annual revenues of less than €750 million. So for a huge swathe of companies operating in Ireland there should be no change, in that the 12.5% rate will continue to apply. Importantly, Minister Donohoe stated that he has received assurances from the EU Commission that "maintaining the headline 12.5% corporation tax for businesses out of scope of the OECD agreement does not present any difficulties".

While the details of the OECD two-pillar measures and their implementation remains to be determined and agreed, other positive changes to the Irish tax code remain a possibility. The Minister referred to the simplification of the Irish tax code, which would be a welcome development.


oecd, international tax reform, pillar two, international tax