Pillar Two – What are your filing obligations?

Pillar Two is now in force in Ireland, with the effect that a 15% minimum effective corporation tax rate applies to large corporate groups and standalone entities with a turnover of €750m or more, for accounting periods commencing on or after 31 December 2023.

Ireland has introduced the Income Inclusion Rule (IIR) and Qualified Domestic Top Up Tax (QDTT) with effect for accounting periods commencing on or after 31 December 2023, while, subject to some exceptions, the Undertaxed Payment Rule (UTPR) will take effect for accounting periods commencing on or after 31 December 2024. The UTPR will apply for periods commencing on or after 31 December 2023 where the ultimate parent entity (UPE) of the group is located in Malta, Estonia, Lithuania, Latvia or Slovakia and is delayed until 31 December 2026 in respect of a UPE jurisdiction with a statutory corporation tax rate of at least 20%.

The Pillar Two rules will have no effect for groups below the €750m threshold and those groups will continue to be subject to the existing Irish corporation tax rules, including the 12.5% corporation tax rate.

Those groups that are subject to the Pillar Two rules will have a number of additional filing obligations.

This insight sets out the registration obligations of groups, what additional returns must be filed, and when they are due.

Registering for Pillar Two Taxes

Any Irish entities that are subject to the IIR, QDTT and/or UTPR must register with Revenue in respect of each applicable tax within 12 months of the end of the first fiscal year in which the entity is subject to that tax. Bear in mind that within a corporate group, there may be multiple entities with liabilities to each of the different taxes, depending on the group structure.

For example, a company with a 31 December year end that will be liable to the IIR and QDTT for 2024, must register for these taxes by 31 December 2025. If that company is then liable to the UTPR in 2025, it will need to register for the UTPR 31 December 2026.

When registering for any Pillar Two taxes with Revenue, the entity must provide:

  • its name and Irish tax registration number
  • where relevant, the name, location and tax registration number of its UPE and of any designated filing entity (or where the entity is itself a designated filing entity, it must provide the names and Irish tax registration numbers of the entities for which it is a designated filing entity)
  • the details of any group filing elections under the QDTT or UTPR
  • any other information which may be requested by Revenue for this purpose

Once registered, entities must notify Revenue of any change in the information provided to Revenue, including if the entity ceases to be subject to the relevant tax, within 12 months of the end of the fiscal year in which the change occurs.

Failure to comply with these registration requirements, or failure to notify Revenue of a relevant change, gives rise to a potential penalty of €10,000. However, for fiscal years beginning on or before 31 December 2026, no penalties will be imposed on entities that take reasonable care to ensure correct application of the legislation.

Recommendations in relation to registering for Pillar Two taxes
  • Identify all Irish-located group entities and which Pillar Two taxes they are subject to.
  • Register the entities for all relevant taxes.
  • Monitor these entities on an ongoing basis and ensure that any changes are notified to Revenue, including any future registrations required for UTPR.

The Top-up Tax Information Return

Any Irish entity that is within scope of Pillar Two must submit a top-up tax information return to Revenue within 15 months from the end of its fiscal year. This deadline is extended to 18 months from the end of the entity’s first year within the scope of Pillar Two. For example, for a company with a 31 December year end that is subject to any Pillar Two tax in 2024, its first information return will be due on 30 June 2026.

The information return is in the same form as the OECD’s standardised GloBE Information Return (GIR). It requires substantial information about the whole group, including:

  • information on the entity and its group structure
  • any information necessary to calculate the effective tax rate for each jurisdiction, the top-up tax for each constituent entity and the allocation of the top-up tax amount under the IIR and UTPR for each jurisdiction
  • a record of all elections made or withdrawn
  • details of the Pillar Two tax liabilities in each jurisdiction, including tax computations

Where a group has multiple entities in Ireland, it can appoint one entity as its designated local entity, which will file the GIR on behalf of all group entities in Ireland.

The requirement to file the GIR is waived in the following two scenarios and, instead, entities will file a more limited information return:

  • Where an information return is submitted by the UPE or by a designated filing entity in another jurisdiction which has an automatic exchange of information agreement in place with Ireland.
    • Instead, a simplified “notification of filer” should be filed with Revenue, containing details of the entity that is filing the return in another jurisdiction.
  • Where the UPE is located in a non-EU jurisdiction applying “equivalent” Pillar Two rules.
    • Instead, an information return containing details of all in-scope entities and any information required to apply the IIR, UTPR and QDTT should be submitted to Revenue.
Recommendations in relation to the top-up tax information return
  • In order to ease the compliance burden, identify whether the GIR will be filed by the UPE or another designed filing entity.
  • Ensure that the GIR is filed on or before the relevant deadline so that other group entities can rely on that return and file only simplified information returns in their local jurisdictions.

The Pillar Two Tax Returns

The filing deadline for the IIR, QDTT and UTPR returns is 15 months from the end of the fiscal year. For the first year in which an entity is subject to any of the Pillar Two taxes in Ireland, the deadline is extended to 18 months from the end of the fiscal year.

For example, a company with a 31 December year end is liable to QDTT in Ireland in 2024. Its QDTT return will be due on 30 June 2026. If the company becomes liable to UTPR in 2025, it will have to file a QDTT return and a UTPR return by 31 March 2027, i.e. it does not get the filing extension in respect of the UTPR return because, although it was the first year it was liable to UTPR, it was liable to QDTT in the previous year.

If a company that was not previously liable to any Pillar Two taxes joins the group in 2026, it will be able to avail of the filing extension for its first year filing(s), notwithstanding other group members have previously been subject to Pillar Two taxes.

Appointing a Group Filer – QDTT and UTPR

In respect of the QDTT and the UTPR, one group member can be appointed to file the relevant return on behalf of all Irish group members. The group filer will be primarily liable for the relevant tax in respect of all the Irish group members. However, if the group filer fails to pay the tax, Revenue can serve a notice on another group member, requiring it to pay the outstanding amount (including interest, surcharges and penalties), within 30 days.

Where a group filer is appointed, it must represent all Irish members of that group. While having a group filer may ease the administrative burden of these taxes, it may add complexity where a group member leaves the group, so careful consideration is needed before electing into a group.

Recommendations in relation to the Pillar Two tax returns
  • Identify what Pillar Two taxes each group entity is subject to.
  • Consider appointing a designated filing entity to file the QDTT and UTPR returns in respect of all in-scope entities.

You should also be aware…

Date of Payment of Pillar Two Taxes

The Pillar Two taxes are due on the relevant filing deadline (i.e. 15 months from the fiscal year end, or 18 months where it is the first year in which the entity is liable to Pillar Two taxes).

Late Return Surcharge and Late Interest

The surcharge for late returns is significantly higher than for corporation tax returns. Where the return is less than two months late, a 5% surcharge (capped at €50,000) will apply; after that a 10% surcharge (capped at €200,000) will apply.

Additionally, late interest will apply at a daily rate of 0.0219% from the due date on any unpaid amount.

Obligation to keep records

Adequate records must be kept for a period of 6 years from the end of the fiscal year to which they relate. Failure to comply with this requirement will result in a penalty of €10,000.

Penalties

Where an entity fails to file an information return (regardless of whether it has appointed a designated local filer) or where it has appointed a designated filing entity in another jurisdiction, a notification of filer, by the return date, it will be subject to a penalty of €10,000 per month (up to a maximum of €480,000). Failure to file an IIR, UTPR or QDTT return by the return date will also give rise to a penalty of €10,000.

However, as referenced above, for fiscal years beginning on or before 31 December 2026, no penalties will be imposed on entities that take reasonable care to ensure correct application of the legislation. Surcharges for late returns and interest on overdue amounts will nonetheless apply.

Key contacts

For more information on this, please contact Paul Fahy, Partner, James Somerville, Partner, Amelia O’Beirne, Partner, Dearbhla O'Gorman, Senior Associate, Cian Ryan, Solicitor, or any member of A&L Goodbody's Tax Department.

Date published: 17 April 2024