Tax Update
As at 31 March 2026
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Ireland's Presidency of the Council of the EU
In the second half of 2026, Ireland will assume the Presidency of the Council of the EU. During the six-month period, Irish ministers and officials will chair the majority of Council of Ministers meetings, steer the EU’s policy agenda and represent the Council of the EU in negotiations with other EU institutions. The Presidency will be organised around three interconnected themes: (i) strengthening economic competitiveness; (ii) enhancing collective security; and (iii) upholding European values.
Two EU tax proposals will be issued immediately in advance of the Irish Presidency: (i) the Tax Omnibus package which will look to simplify aspects of existing EU tax directives including the Anti-Tax Avoidance Directives, the Parent Subsidiary Directive, the Interest and Royalties Directive and the Mergers Directive; and (ii) a recast Directive on Administrative Co-operation which will look to consolidate and simplify the existing directives on administrative co-operation within the EU (known as the ‘DACs’). Those files will represent some of the key EU legislation that will be progressed by the Irish Presidency. The draft proposals are expected to be published in June.
You can read more about the Presidency and keep up to date on Matheson’s dedicated EU Presidency Hub.
Side-by-side… until it isn’t: the global minimum tax under strain
Our latest Pillar Two insight, examines the recently released OECD side-by-side package and its implications for the international tax landscape. While the package has been broadly welcomed as a demonstration of renewed multilateral cooperation, our update takes a closer look at what it means in practice for the Pillar Two global minimum tax framework. In particular, we consider two significant developments: the dilution of the undertaxed profits rule (“UTPR”) through the exclusion of US-headquartered multinational groups, and the introduction of a new favourable treatment for qualified tax incentives (“QTIs”). We assess how the UTPR exclusion may prompt certain jurisdictions to reconsider their qualified domestic minimum top-up tax regimes, particularly those competing for US foreign direct investment, and how the new QTI treatment effectively reopens the door to a degree of tax competition that the original Pillar Two framework was designed to curtail.
Please reach out to your usual Matheson contact or any of our Tax partners if you would like to discuss how these developments may affect your business.
Updates to Revenue Guidance on Pillar Two
The Irish Revenue Commissioners recently updated their Pillar Two Tax and Duty Manuals (“TDMs”) to reflect legislative changes made in Finance Act 2025, and to provide certain additional clarification.
The first TDM relates to the operation of the Pillar Two rules and this guidance has been updated to provide further clarity on:
- legislative changes in Finance Act 2025, including those with respect to the relevant accounting standard to be used for qualifying domestic top-up tax purposes where entities are liquidated, dissolved or otherwise cease to exist during the fiscal year or where an entity is established or formed during the year as well as updates regarding the treatment of utilisation of loss deferred tax assets;
- scenarios involving intra-group financing arrangements where carried forward losses are used to offset tax in a high-tax jurisdiction; and
- the treatment of certain deferred tax assets arising from benefits provided by governments.
The second TDM relates to administrative matters and has been updated to provide further guidance on the sharing of Pillar Two return information under DAC9, the updated EU Directive on Administrative Cooperation, as well as providing further details on taxpayers’ record keeping obligations.
Update on EU / US trade deal: European Parliament moves to advance implementation
As mentioned in our February update, the European Parliament announced on 23 February 2026 that it would postpone a vote to ratify the EU / US trade agreement. However, since that date the EU has resumed work on implementing the framework trade deal with the US.
On 26 March 2026, the European Parliament adopted two proposals to allow the European Commission (the “Commission”) to begin negotiations on implementing the EU / US trade agreement. The decision to adopt the proposals and to advance implementation of the EU / US trade agreement was supported by a two-thirds majority.
While the steps taken by the European Parliament represent welcome progress, critically, they do not constitute a final agreement and more work will be required before the trade agreement is finally approved. The European Parliament voted to incorporate a number of significant safeguards designed to protect EU interests throughout the process, including:
- a suspension clause, permitting the Commission to propose suspending the agreement if the US imposes tariffs exceeding a 15% ceiling or takes other actions deemed harmful to EU interests;
- a sunset clause, under which the agreement will automatically expire on 31 March 2028 unless extended by new legislation following an impact assessment;
- a safeguard mechanism, allowing the Commission to monitor the impact of the new rules and suspend the agreement if US imports reach levels that could cause serious harm to EU industries; and
- a sunrise clause, providing additional protections linked to US compliance with its commitments. These conditions include the US lowering its tariffs on EU products with a steel and aluminium content below 50% to a tariff of maximum 15%.
These measures reflect ongoing concern within the European Parliament regarding tariffs, particularly following the US Supreme Court's invalidation of the IEEPA tariffs in February and the subsequent announcement of temporary replacement tariffs by President Trump.
Next steps
The European Parliament's vote enables the Commission to proceed into negotiations with the European Council. Any final agreement will still require approval from the European Parliament and the safeguard provisions mean the deal remains conditional on full US compliance with its commitments.
Our Customs and Trade law team are monitoring developments closely and will keep you informed as matters progress.
InDisputes – Flaherty v Revenue Commissioners
The Irish Supreme Court recently considered when a contract should be considered to be 'conditional' for Irish capital gains tax (“CGT”) purposes in the case of Sean Flaherty v The Revenue Commissioners. If a contract is 'conditional', it impacts the timing of the disposal for the purposes of CGT. While the decision brings some clarity to the Irish position, it may be considered to diverge from the UK position on the same point.
Kevin Smith, Laura Walsh and Clíodhna MacCabe consider the decision in our most recent InDisputes update.
