OECD minimum tax rate: What to expect following Ireland’s agreement

On 8 October 2021, the OECD announced that a total of 136 countries, among which Ireland, had reached a political agreement on a minimum effective rate of 15% for businesses.

The introduction of this minimum corporation tax rate of 15% has not been finalised at OECD level. Consequently, there is no reference to it in Ireland’s recently published 2021 Finance Bill. The new minimum rate is likely to be only implemented in 2023 at the earliest.  

Prior to agreeing, Ireland sought reinsurance from the OECD on two key aspects:  

• to ensure that the effective rate is 15%, as opposed to “at least” 15% as provided for in the original agreement. This provides certainty that the rate will be increased in the future.  
• EU officials including the Trade, Competition, and Economy Commissioners confirmed that it will be possible for Ireland to retain its 12.5% rate for companies below the OECD Pillar Two threshold (that is companies or groups with global turnover not exceeding €750 million).

This new 15% corporation rate is expected to only impact around 1,500 businesses in Ireland, mostly foreign-owned groups. Businesses with global turnovers of less than €750 million will be outside the scope of the new rules, and as a result, the 12.5% corporation tax rate will continue to apply to them.

Ireland‘s active participation in the tax reform provides investors with the certainty of their tax position. The country’s attractiveness as an investment location remains, thanks to other key elements of the country’s corporate tax regime, such as the R&D tax credit system and the new Digital Gaming tax credit, as well as non-tax aspects such as education, skills, research, housing, and other economic infrastructure.