Ireland introduces 15% corporate tax rate

Ireland introduces 15% corporate tax rate

Jan 5, 2024

The largest multinationals in Ireland will have to start paying corporate tax at 15%, marking a 2.5% increase on the current rate

The rise follows the introduction of the global 15% base rate of corporate tax for multinationals with income in excess of €750m (£648m) in line with the new OECD Pillar Two framework.

About 1,600 multinational groups are expected to be within scope of the higher tax rate, which came into effect on 1 January 2024. The 12.5% rate will continue to apply to the majority of businesses operating in Ireland.

Ireland has long been popular with US multinationals with tech giants like Microsoft, Apple, Amazon and HP all basing their European headquarters in the country due to the attractive tax environment.

The Irish government said: ‘In line with published OECD guidance on Pillar Two implementation, the legislation includes transitional and permanent safe harbours, which aim to ease the administrative burden on in-scope businesses, particularly in the initial period of the application of the Pillar Two rules.’

At the same time, Ireland has increased the tax credit for research and development (R&D) by 5% to 30% to help large and small businesses invest in future productivity.

Minister for finance Michael McGrath said: ‘By implementing the global agreement on minimum effective corporate tax, Ireland demonstrates our continuing commitment to agreed, multi-lateral international tax reforms.

‘The decision to join this global agreement was not taken lightly. Ultimately, it is our assessment that the positive effects will be greater than 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, safeguarding our future competitiveness by providing a sound and stable basis for inward investment into Ireland in the long-term.

‘It is my firm belief that a key benefit of a more settled international tax policy environment will be an increased scope to focus on domestic tax policy in the enterprise sector, with several initiatives to improve aspects of the overall tax system announced in Budget 2024.

‘These include an increase in the R&D tax credit from 25% to 30% which will incentivise businesses of all sizes to invest in their future productive capacity, as well enhancements to the employment investment incentive, start-up capital incentive and start-up relief for entrepreneurs schemes and a new lower rate of CGT for angel investors.’

Almost 140 jurisdictions have signed up to the Pillar Two reforms and have committed to enforcing the 15% base rate.

There are three Pillar Two charging rules: an income inclusion rule (IIR) which operates via group parent entities, an undertaxed profit rule (UTPR) that can be operated by other group entities as a backstop provision where an IIR has not applied, and an optional qualified domestic top-up tax (QDTT), which provides for the collection in a jurisdiction of any top-up tax due in respect of in scope entities located in that jurisdiction. Ireland has elected to apply a QDTT.