IBX-Jakarta. Ireland is introducing its most significant revamp of the corporate tax system in thirty years, imposing a 15 percent corporation tax rate on hundreds of companies. This adjustment aligns with Ireland’s adherence to the Organisation for Economic Co-Operation and Development’s (OECD) Pillar Two agreement, which establishes a new minimum effective tax rate for major multinational corporations.
Under this accord, nearly 1,600 multinational companies operating in Ireland will face the heightened tax rate. Only firms with turnovers surpassing Euro 750 million in at least two of the past four years will be subjected to the supplementary tax, bridging the gap between their current effective tax rate and the new mandated 15 percent. A vast majority of businesses in Ireland, over 99 percent, will persist with the prevailing 12.5 percent corporate tax rate, established for the past twenty years, although numerous enterprises effectively pay less due to deductions and allowances. Although the tax responsibility has initiated, affected companies are not obliged to pay the added tax until 2026, allowing for a seamless transition.
The OECD agreement, supported by 140 other nations, modernizes international tax regulations, especially addressing the concern of technology giants shifting profits to low-tax jurisdictions like Ireland. While Ireland might eventually gain from these tax changes, the Pillar One component of the OECD plan, aiming to grant larger nations more taxing authority, could potentially disadvantage Ireland. Consensus on implementing these alterations has yet to be reached.
Michael McGrath, Ireland’s Minister for Finance, welcomed the application of the minimum effective corporation tax regulations, highlighting Ireland’s dedication to global tax reforms. “In the end, we believe that the positive outcomes will outweigh the challenges, as the agreement has the potential to bring much-needed stability to the international tax framework after the turbulence and uncertainty of recent years. This safeguarding of our future competitiveness will provide a solid and steady foundation for attracting investment into Ireland in the long run.” He also emphasized domestic tax policy enhancements introduced in Budget 2024, including increases in R&D tax credits and incentives for businesses and angel investors.
Source: Corporate tax rate increasing to 15% for some large firms in Ireland (msn.com)