The Organisation for Economic Co-operation and Development (OECD) in the US has released further information on the Pillar Two Side-by-Side Package, setting out how the US may engage with the Pillar Two global minimum tax framework.
The arrangement provides that multinational groups headquartered in the US will be excluded from the majority of Pillar Two requirements, which in Ireland have been introduced through the EU Minimum Taxation Directive.
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Under the agreed approach, jurisdictions that operate a minimum tax regime sharing comparable objectives and a similar scope to Pillar Two may be granted Side-by-Side status (SbS).
The documentation highlights that, in Ireland, qualified domestic minimum top-up taxes (QDMTTs) that are consistent with Pillar Two will continue to apply to Irish subsidiaries of US-based multinational groups.
This means that QDMTTs are expected to remain payable in Ireland, supporting the continuation of comparable tax outcomes across affected entities.
In the US, the Inflation Reduction Act brought in a corporate alternative minimum tax (CAMT) set at 15%, applying to tax periods starting after 2022.
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By GlobalDataThis results in the same minimum tax rate applying to both US and Irish-headquartered companies.
The report notes that this alignment is relevant in preventing the compromise from creating an immediate competitive imbalance between companies based in the US and those headquartered in Europe or other countries that have implemented Pillar Two.
Beyond the SbS safe harbour, the package also introduces a number of administrative simplifications.
These include a simplified effective tax rate safe harbour, an extension of the transitional country-by-country reporting safe harbour and a substance-based tax incentive safe harbour.
