Irish Tax Monitor: Roundatable Q&A

BEPS - review and outlook

Q: This past year - 2025 - has been a watershed year for the OECD’s BEPS project, and some might say even a terminal year. Can you summarise the main developments, providing your assessment of its prospects in 2026, and what it might mean for large Irish corporate taxpayers in particular?

A: After years of negotiations, the OECD/G20 Base Erosion and Profit Shifting (BEPS) project has made progress with the “Two-Pillar” solution. This includes Pillar One, which focuses on reallocating taxing rights, and Pillar Two, which establishes a global minimum tax. 2025 marked a significant step in the initiative that has lasted a decade.

The work on Pillar One, which involves Amount A and Amount B, is still ongoing and implementation is not yet complete. By early 2025, the OECD announced that the text for Amount A in the Multilateral Convention was mostly finished and stable. However, it did not open for signing as planned and it failed to secure sufficient support for ratification. The United States withdrew its political support in January 2025, making ratification practically impossible.

Amount B has progressed further. There was a general agreement on a more straightforward transfer pricing approach for basic distribution activities. However, there was no full agreement on pricing details or safe harbour outcomes. As a result, Amount B is optional, has limited scope and is not adopted consistently.

Pillar Two has been implemented in over 60 jurisdictions, with the EU Minimum Tax Directive applied uniformly across Member States. Ireland has fully adopted the Qualified Domestic Top-Up Tax (QDTT), Income Inclusion Rule (IIR) and a registration and penalties regime. The Pillar Two registration platform in Ireland launched in August 2025, with mandatory registration initially due by 31 December 2025, later extended to 28 February 2026. Non-compliance incurs a €10,000 penalty, marking the shift from policy debate to compliance.

In late 2025, the OECD/G7 introduced the “Side-by-Side Package”, which was agreed in January 2026 and negotiated throughout 2025. It included new permanent and transitional safe harbours, formal accommodation of the US minimum tax regime and continued emphasis on QDTTs. This package prevented Pillar Two's collapse amid US opposition and will be reviewed in 2029 to ensure it meets its global minimum tax objectives.

Irish multinationals with a turnover of €750 million or more must comply with several key requirements: registering and filing the GloBE information return (GIR), the QDTT return and/or IIR returns. These requirements can lead to significant compliance costs and advisory fees.

While Ireland's headline corporate tax rate of 12.5% remains unchanged for domestic purposes, the introduction of Pillar Two mandates a minimum effective tax rate of 15% for large groups, achieved through top-ups. Initially, this change may increase revenue for the Irish government; however, over time, Ireland's attractiveness for foreign direct investment (FDI) could diminish if other elements, such as Pillar One reallocations, reduce the effective tax advantage.

The administrative burden for large Irish businesses increases due to the need for expanded reporting, modelling, and global coordination. In theory, a global minimum tax rate helps mitigate the risk of a "race to the bottom," and contributes to the stabilisation of global tax norms. However, for a country like Ireland, this situation could lead to less differentiation in attracting FDI based solely on tax incentives.

The OECD has indicated that jurisdictions attracting a disproportionate amount of FDI may initially experience revenue increases from Pillar Two top-ups. However, the long-term impacts will depend on the dynamics of global tax competition. The BEPS initiative is now entering a mature implementation phase, focusing on balancing political compromises, such as side-by-side tax regimes, with practical compliance frameworks. For Irish corporate taxpayers, key themes to monitor in 2026 include managing compliance with Pillar Two, understanding the impact on effective tax rates, and adapting to ongoing global tax reform trends.

Ireland's EU Presidency & taxation at an EU level

Q: From an EU taxation perspective, what would you like to see Ireland prioritising in 2026, with its upcoming EU Presidency in the second half of 2026 in mind?

A: The EU presidency is always an excellent opportunity to put increased attention at the EU level on topics that matter to the country leading for six months. While issues related to the environment and climate change continue to impact all, it seems unlikely that taxation to support a green transition will be championed while Ireland holds the presidency. It is a shame to see a topic so closely linked to the EU’s energy independence and sustainability be relegated, however, in the current international and domestic contexts, it does not seem to be a priority.

The taxation omnibus, which aims to streamline and modernise existing EU frameworks, is planned for discussion in Q2 2026. This will certainly still be on the agenda in the second half of 2026 and represents an opportunity for the Irish government to show its continued focus on improving the EU’s competitiveness and business environment within the bloc by simplifying the taxation system, especially for cross-border transactions. This omnibus also aims to increase transparency and the exchange of information within the EU. Championing this legislation would send the message that Ireland is dedicated to the highest standards of transparency and to the development of efficient exchange of information systems. This, in turn, could help move away from the low tax jurisdiction’s etiquette still associated with the country at times.

The taxation of interest in Ireland

Q: The Department of Finance has published a 'Strawman' proposal setting out an alternative approach to the taxation and deductibility of interest in Ireland. What is your assessment of the proposal? Does it sufficiently address stakeholders’ primary concerns?

A: The proposal makes welcome progress in several areas. Moving non-trading interest income to an accruals basis aligns with international best practice and the inclusion of “interest equivalent” amounts to ensure consistency with interest limitation rules. A five-year transitional period for existing arrangements is also pragmatic. However, significant challenges remain.

The suggested “profit motive” test for deductibility is commercially unrealistic. Businesses often borrow for strategic reasons that do not immediately boost profits and tracking profit impact on a loan-by-loan basis would impose a heavy compliance burden. Retaining the well-understood “wholly and exclusively” test for trading entities, with minor anti-avoidance refinements, would provide greater certainty.

The main issue which the project should focus on is non-trading interest deductibility. Currently, the Section 247 regime is overly complex, Qualifying Financing Companies can only be used in limited circumstances and the absence of a fit-for-purpose finance company regime forces reliance on Section 110 structures beyond their intended scope. The Strawman proposal goes some way towards addressing these issues but does not fully address stakeholders’ primary concerns. The proposed “profit motive” test should be replaced with a “commercial motive” test as initially requested by stakeholders in the Interest Consultation held in early 2025. Additionally, the Strawman only contemplates minor updates to Case iii loss provisions to allow for the carry forward of losses; however, consideration should be given to extending loss relief under Case iii and iv to allow for relief against other income and group relief, as is currently available under the Section 247 regime.

Finally, extending transfer pricing documentation requirements to SMEs undermines the reform’s stated goal of simplification, imposing disproportionate compliance costs on smaller businesses.

While the Strawman addresses alignment and modernisation, its approach to deductibility and SME compliance needs to be rethought. Simplification, not additional complexity, should remain the guiding principle.

Withholding Tax

Q: The Department of Finance and the Revenue Commissioners have launched a joint public consultation on eWHT. What are the key aspects of the proposed changes? What impact will they have on taxpayers?

A: As detailed by the then Minister for Finance, Mr Paschal Donohoe TD, in his Budget speech on 7 October 2025, a joint Department of Finance and Revenue public consultation has been launched to look at the modernisation and expansion of withholding taxes. This will look at the modernisation of PSWT and RCT, the expansion of a withholding tax to the platform economy and the introduction of Personalised Deduction Rates (PDR) in a new withholding tax regime for self-employed workers. The aim of the updates is twofold: to reduce compliance costs and provide efficiencies for businesses, and to enable seamless tax collection by Revenue.

When it comes to RCT and PSWT, most businesses find the compliance requirements associated with these to be manual and time-consuming, and if dealing with both systems, must engage with two different withholding and reporting systems. eWHT proposes a move towards real-time taxation, “right tax at the right time” for businesses subject to withholding, including businesses providing services via an online platform. Revenue will engage with software providers to develop a real-time data exchange process between Revenue’s systems and taxpayers’ systems, ensuring that tax withheld will be automatically credited against preliminary tax liabilities of the taxpayer. This information will also be prepopulated in tax returns.

A new lower flat rate of withholding will apply to corporate and non-corporate entities (non-individuals). A Personalised Deduction Rate (PDR) will be calculated by Revenue for self-employed individuals. The PDR will be applied to each payment and will ensure that the amounts withheld on each payment are more reflective of the actual tax liability due on that payment. The aim of introducing the PDR is to improve cash flow management and to give self-employed individuals a simplified way to meet their preliminary tax obligations, rather than a large payment being due on filing the prior year income tax return. 

The deadline for submissions is 30 January.

Tax Technology

Q: Would you comment on significant developments in the area of tax technology in 2025, focussing on applications of AI in applied tax practice in particular?

A: New technology constantly presents opportunities for process reinvention, for example, by digitising existing work. Artificial Intelligence (AI), however, is more than that. AI reshapes the work itself. AI-driven solutions can provide faster tax insights, greater accuracy, and forward-looking decision support to tax professionals across our global organisations.

AI is replacing repetitive tasks within tax compliance and planning with the introduction of AI-assisted tax preparation tools. AI is accelerating tax data extraction and analysis, scanning documents for relevant figures, classifying transactions for tax treatment, and even identifying applicable deductions or credits. AI can help prepare tax filings by assembling data into the proper formats and checking against regulations.

AI can continuously scan global regulatory databases and legal texts to summarise new laws, deadlines and changes, promptly alerting tax teams and enabling them to adapt their strategies accordingly. Providing tax advisors with knowledge of tax developments and industry trends frees us up to spend more time interpreting and advising our clients.

AI tax advisory tools that have been developed can project future tax outcomes under different scenarios, e.g. what-if analyses for new investments. This allows us, as tax advisors, to offer more strategic tax planning by using predictive analytics to advise on the tax impact of decisions. It can detect patterns and trends in tax data to uncover risks and optimise transactions.

The future of AI in tax technology isn't a distant horizon; it is unfolding and accelerating now. It will reshape how we work, combining human judgement and caution with automation, whilst meeting clients’ rising expectations for digital service. The adoption of AI must be strategic, secure, and compliant with evolving regulations to effectively modernise tax compliance, drive efficiency, and enhance accuracy.

Read the full articles on the Irish Tax Monitor here.