IRISH PROPOSED LEGISLATION
Taxation and Certain Other Matters (International Mutual Assistance) Bill
This bill will transpose elements of the OECD Mutual Convention on Administrative Assistance and the EU / Switzerland Anti-Fraud Agreement.
Latest stage: Work ongoing. Heads in preparation. Listed as "all other legislation" in the Spring 2025 Legislative Programme.
Finance (Tax Appeals and Fiscal Responsibility) Bill
To amend the Finance (Tax Appeals) Act 2015 to allow for the appointment of non-temporary Commissioners with different tiers of responsibility and potential amendments to address the Supreme Court decision in Zalewski v An Adjudication Officer & Ors [2021] IESC 24. This bill will also amend the Fiscal Responsibility Act 2012 and provide for related matters.
Latest stage: Heads of bill were approved in June 2024. Listed for priority drafting in the Spring 2025 Legislative Programme, a draft of the bill is expected in Autumn 2025.
Local Property Tax Bill
The purpose of this bill is to amend the Finance (Local Property Tax) Act 2012, to amend the Taxes Consolidation Act 1997, and to provide for related matters.
Latest stage: Work is underway. Listed as "all other legislation" in the Spring 2025 Legislative Programme.
EU REGULATIONS
Regulation on Carbon Border Adjustment Mechanism
Date published: 16 May 2023
The EU’s Carbon Border Adjustment Mechanism (CBAM) aims to promote lower carbon manufacturing and industrial processes and to tackle the challenges posed by climate change. The CBAM puts a fair price on the carbon emitted during the production of certain carbon intensive goods entering the EU, with a view to encouraging cleaner industrial production in non-EU countries. The objective of CBAM is to prevent carbon leakage from the EU, which occurs when businesses move their production to countries with lesser emission constraints than the EU. This regulation is directly effective and Revenue have published a guide on the practical aspects of the implementation of CBAM (see here).
Implementation: The implementation of CBAM commenced on 1 October 2023 and the transitional phase will continue until 31 December 2025. Since 1 January 2024, importers of CBAM goods are obliged to register on the CBAM Transitional Registry and file quarterly reports of CBAM imports. CBAM applies to iron, steel, aluminium, cement, electricity, fertilisers and hydrogen that are produced outside the EU. During this transitional phase, importers of CBAM goods have a quarterly information reporting obligation under CBAM. For example, the July-September 2024 reporting period submission was due by 31 October 2024, with modifications possible until 30 November 2024. The report is submitted to the CBAM Transitional Registry. For importers of CBAM goods that are established in Ireland, the CBAM Transitional Registry can be accessed through the Commission website (see here). From 1 January 2026, relevant importers will be required to purchase and surrender CBAM certificates in connection with imported goods in scope, the price of which will be calculated based on the weekly average auction price of EU ETS allowances expressed in €/tonne of CO2 emitted. The first payment will be due by 31 May 2027 in respect of imports during 2026.
Irish CBAM Regulations
Ireland has recently introduced domestic regulations in respect of CBAM. On 18 October 2024, the Minister for the Environment, Climate and Communications, published S.I. No. 539/2024 - European Communities (Carbon Border Adjustment Mechanism) Regulations 2024 (the “Irish Regulations”) in Iris Oifigiúil. The Irish Regulations came into operation on 25 October 2024. For the most part, the Irish Regulations closely align with the contents of the CBAM Regulation and Transitional CBAM Regulation. However, there are some additional items in the Irish Regulations that should be considered.
For example, the Irish Regulations provide that from 1 January 2026, Revenue shall not allow the importation of CBAM goods by any person other than an ‘authorised CBAM declarant’. The Irish Regulations designate Environmental Protection Agency (“EPA”) as the national competent authority for CBAM purposes and the Irish Regulations set out the powers of authorised officers appointed by the EPA to ensure compliance with the Irish Regulations. Authorised officers can inspect and remove documents, take samples of goods, and carry out testing of samples. The Irish Regulations also provide that the EPA may issue directions to persons to comply with the Irish Regulations. Failure to comply with such directions is an offence and persons found guilty of an offence will be liable:
- on summary conviction, to a Class A fine or to imprisonment for a term not exceeding 12 months, or both, or
- on conviction on indictment, to a fine not exceeding €500,000, or to imprisonment for a term not exceeding 3 years, or both.
Latest stage:
On 26 February 2025, the Commission published a draft ‘Omnibus’ package of proposals for simplification in a number of fields, including CBAM. A key change proposed is the introduction of a de minimis threshold for CBAM. The Commission states that a small number of importers are responsible for more than 99% of emissions caught under CBAM and it is intended that importers who do not import more than 50 tonnes of net mass carbon will be exempt from obligations regarding CBAM authorisation, declarations, and the purchase of CBAM certificates.
The proposed changes also aim to facilitate compliance with CBAM obligations for importers still in the CBAM scope and make CBAM more effective by strengthening anti-abuse provisions and developing a joint anti-circumvention strategy with national authorities.
These legislative proposals will be submitted to the European Parliament and Council for their consideration and adoption.
Matheson insights: Ireland Introduces CBAM Legislation
EU DIRECTIVES AWAITING IMPLEMENTATION (TRANSPOSITION)
Directive amending Directive 2011/ 16/ EU on Administrative Co-operation in the Field of Taxation (DAC8)
Procedure reference: 2022/0413 (CNS)
Date published: 8 December 2022
This directive is the eighth amendment to the Directive on Administrative Co-operation (Directive 2011/ 16/ EU) (“DAC8”). The DAC8 proposals seek to strengthen existing rules and expand the exchange of information framework to address tax issues related to digital currencies, cryptocurrency and e-money, including the lack of information at the level of EU tax administrations.
Transposition date: Member States are to transpose the provisions of the directive by 31 December 2025. The provisions will apply as of 1 January 2026.
Directive on Faster and Safer Relief of Excess Withholding Taxes
Procedure reference: 2023/0187 (CNS)
Date published: 19 June 2023
This directive aims to make withholding tax procedures in the EU more efficient and secure for investors, financial intermediaries and Member State tax administrations. The proposal is structured in two main parts (Chapters 2 and 3).
Chapter 2 provides for the creation of a standardised EU-wide digital tax residence certificate that Member States would be required to issue within an agreed time frame (14 calendar days) and would remain valid for the calendar year during which it was issued. Other Member States would be required to accept such certificates as proof of tax residence.
Chapter 3 provides common withholding tax relief procedures that must be applied to dividends from publicly traded shares and that can be applied to interest from publicly traded securities. In the first instance, it requires Member States that impose withholding tax on dividends that can be relieved under double tax treaties to establish national registers for certain financial intermediaries that handle payments of such dividends (described as Certified Financial Intermediary ("CFI"), which includes financial institutions with assets of EUR 70 billion or more and central security depositories). The national register is to be publicly accessible on a dedicated portal and updated at least once a month. The Member State can remove CFIs from the national register and can also reject the registration of CFIs in certain circumstances (eg, if an inquiry is opened by a Member State or another jurisdiction, in relation to the CFI concerned, on potential fraud or tax abuse which may lead to a loss in withholding tax).
In Member States where a register is required, registered CFIs will be required to report details of dividend payments (including details of the recipient, the payer and the payment itself) on an on-going basis as soon as possible after the relevant record dates. Member States can opt to apply equivalent registration and reporting requirements in respect of interest payments from publicly traded bonds. Under the directive, registered CFIs will be permitted to claim withholding tax relief in line with the applicable double tax treaty either at source or under a quick refund system (a system where the payment is made taking into account the general domestic withholding tax rate followed by a request for refund of the excess withholding tax within 60 calendar days after the end of the period to request the quick refund) (or a combination of both). This development will be welcomed by investors who can face delays in claiming refunds of withholding taxes in certain Member States.
Latest stage: The Council formally adopted this Directive on 10 December 2024 and it was published in the EU’s Official Journal on 10 January 2025. Member States will have to transpose the Directive into national legislation by 31 December 2028, and national rules will come into effect as from 1 January 2030.
EU DRAFT LEGISLATION
Proposal for a Directive on Business in Europe: Framework for Income Taxation (BEFIT)
Procedure reference: 2023/0321 (CNS)
Date published: 13 September 2023
In line with the Commission Communication on Business Taxation for the 21st Century ("Commission's Communication") adopted on 18 May 2021, the Commission is seeking to introduce a common set of rules to calculate the corporate tax base for groups operating in the EU. Under the BEFIT proposal, profits of the BEFIT group members will be consolidated into a single tax base and allocated between the group members. This proposal replaces prior failed proposals (CCCTB (common consolidated corporate tax base) and CCTB (common corporate tax base)). Under the proposal, the new rules will be mandatory for multinational groups operating in the EU with an annual combined revenue of at least €750 million (aligning with the Pillar Two rules). For groups headquartered outside the EU, their EU group members will comprise a BEFIT group if they earned at least €50 million of annual combined revenues in at least two of the previous four fiscal years or at least 5% of the total revenues of the group. Initially the consolidated tax base will be allocated to EU Member States based on the average taxable results in the previous three years. However, that allocation rule is intended to act as a transitional rule only. How allocation would work after the end of the transitional period is left open. If adopted BEFIT must be implemented by Member States by 1 January 2028 and the proposed provisions would apply from 1 July 2028.
Latest stage: The Council has yet to adopt the proposal. The proposal was included in the list of pending tax proposals in the 2025 Commission Work Programme published on 11 February 2025 and discussion on this proposal is on-going at working party level. Progress on the proposal has been slow. The European Economic and Social Committee published an opinion on 7 May 2024 supporting the proposal and setting out certain recommendations, including that BEFIT should be aligned with the Pillar Two rules. A number of EU Member States, including Ireland, have issued reasoned opinions in respect of the proposal. Under the EU legislative process, EU Member States can submit a reasoned opinion on a proposal where they believe that the proposal is in breach of the subsidiarity principle, which limits the EU to acting only in cases where EU action is more effective than action taken at national, regional or local level. However, reasoned opinions can often be used by EU Member States to indicate broader concerns with an EU legislative proposal and, in some cases, can be understood to indicate that the EU Member State would be willing to vote against the proposal.
Proposal for a Directive on Transfer Pricing
Procedure reference: 2023/0322 (CNS)
Date published: 12 September 2023
This proposed directive is part of the BEFIT package and seeks to:
- incorporate the arm's length principle into EU law;
- establish a basic framework for applying transfer pricing rules under EU law; and
- clarify the role and status of the OECD transfer pricing guidelines for Multinational Enterprises and Tax Administrations.
If implemented, the proposal would not significantly impact how transfer pricing applies to Irish taxpayers given it is based on the same OECD principles that form the basis for the existing Irish rules.
The proposed directive seeks to improve the procedures for dealing with transfer pricing adjustments on EU to EU transactions, for example, by introducing a fast-track procedure for corresponding adjustments and processes to facilitate taxpayers self-correcting intra-group pricing using compensating adjustments.
If approved and implemented, the most significant impact of the directive would be the new responsibilities assigned to various EU institutions for transfer pricing matters, most notably for the CJEU, which would act as the ultimate arbiter in EU transfer pricing matters.
It is proposed that Member States will implement the transfer pricing rules by 1 January 2026.
Latest stage: The Council has yet to adopt the proposal. The proposal was included in list of pending tax proposals in the 2025 Commission Work Programme published on 11 February 2025. However, recent discussions at EU working party level, and the Economic and Financial Affairs Council (“Ecofin”) report to the Council on tax issues on 24 June 2024, have indicated that the proposal is very likely to be abandoned in favour of re-establishing a Joint Transfer Pricing Forum. That would operate as a soft law forum that would seek to achieve consistency in approaches to transfer pricing across the EU. A previous version of the forum was discontinued in 2019. The Commission are keen to incorporate a peer review process into the re-established Joint Transfer Pricing Forum but that proposal too has received strong push-back from Member States. Discussion on this proposal is on-going at working party level.
Matheson insight: New EU Proposal for a Transfer Pricing Directive
Proposal for a Directive on Pillar One of the OECD Agreement
Procedure reference: TBC
Date published: TBC
The timing of a Commission proposal on Pillar One will depend on progress made at OECD level.
Amount A is a core element of Pillar One. Broadly, Amount A aims to re-allocate a portion of the profits of the largest and most profitable multinational enterprises ("MNEs") to so-called 'market jurisdictions'. MNEs with consolidated annual revenue exceeding EUR 20 billion and a profit margin that exceeds 10% will be in-scope of Amount A, although there are exclusions for qualifying extractives businesses and regulated financial institutions.
Under the Amount A proposal, 25% of an in-scope MNE's profit that exceeds the 10% threshold is allocated to market jurisdictions. Market jurisdictions are typically the jurisdictions where the ultimate customers of the MNE are located or where the users of the MNEs services are located. Relief for tax on the profits allocated under Amount A is given by the jurisdictions where the MNE is most profitable. The allocation to a market jurisdiction can be reduced to the extent residual profits are reported there under the marketing and distribution safe harbour.
If Amount A is agreed, it will replace existing digital services taxes and other similar measures that have been adopted in a number of jurisdictions. In addition, it will preclude participating jurisdictions from introducing future similar taxes.
The second element of Pillar One is Amount B, which proposes to apply standardised transfer pricing approaches to baseline marketing and distribution activities. The simplified and streamlined approach proposed under Amount B may only be applied by ‘covered jurisdictions’ (published on the OECD website and reviewed every five years) and is optional for those jurisdictions.
The OECD Inclusive Framework on BEPS (the “Inclusive Framework”) published the text of the multilateral convention (“MLC”) to implement amount A of Pillar One on 11 October 2023 with a view to opening the MLC for signature by the end of June 2024. However, this deadline passed and it is understood that work to try resolve the remaining open issues is ongoing.
On 13 January 2025, the Co-Chairs of the Inclusive Framework issued a statement on the progress on Pillar One. In summary, the text of the MLC on Amount A has been agreed but one jurisdiction refused to adopt it at the Inclusive Framework meeting in June. That jurisdiction cited the absence of consensus on the Amount B Framework and therefore is understood to be the US.
No updated version of the MLC text has been issued but, the statement confirms that:
- adjustments have been made to the definitions of DST and relevant similar measures, including with respect to de-facto ring-fencing;
- provision has been made for the application of the MLC to a non-State jurisdiction; and
- further adjustments have been made to the operation of the Marketing and Distributions Safe Harbour.
The statement also confirms that significant work has been done on how Amount B should apply between jurisdictions that are party to the MLC. The Inclusive Framework is due to meet again in April and July of this year.
Latest stage: A proposal for a draft directive on Pillar One will be published subject to the outcome of the discussions of the Inclusive Framework but no specific timeline has been announced. The Pillar One proposal was deeply unpopular with Republicans and Democrats in Congress. It is widely expected that no progress will be made on Amount A under the Trump Administration. The project is likely to remain in a state of suspension for quite some time.
Proposal for a Directive Laying Down Rules to Prevent the Misuse of Shell Entities for Tax Purposes (ATAD 3)
Procedure reference: 2021/0434 (CNS)
Date published: 22 December 2021
The purpose of this legislation is to prevent the misuse of shell companies for tax purposes, amending Directive 2011/16/EU. The legislation will tackle legal entities of minimal substance that do not perform any economic activities and are used for the purposes of tax avoidance and evasion.
The original draft of the directive set out three ‘gateway’ criteria (related to passive income, cross border transactions and outsourced management and administration) to identify shell entities that are resident in the EU. Entities that met all three gateway criteria were required to report on whether they met minimum substance requirements through their annual tax returns. If an entity did not meet all of those minimum substance requirements (or did not provide sufficient documentary evidence) it would be classified as a shell entity and will be denied access to tax treaties and denied tax benefits under the Parent-Subsidiary and Interest and Royalties Directives.
Certain entities are excluded from the proposed directive, such as listed companies, certain regulated financial undertakings and domestic holding entities. An entity can also be exempted if it can prove that there is no tax advantage arising from its use.
Member States have been unable to agree to the draft directive as originally proposed. In September 2023, a revised draft of the directive removed the denial of access to tax treaty benefits and benefits under the Parent-Subsidiary Directive and the Interest and Royalties Directive and instead required information about those entities identified as shell entities to be exchanged between Member States. No agreement was reached on that compromise text. In June 2024, a further revised text was proposed that removed the substance requirements.
Latest stage: The Commission proposed this directive in late 2021 and a number of compromise texts have been proposed since then. The European Parliament approved an amended version of the directive on 17 January 2023. The proposed directive is currently subject to discussions within the Council where it must be approved unanimously by all EU Member States before it can be adopted into EU law. In the Ecofin report to the Council on tax issues on 24 June 2024, it states that further discussions will be required to find compromise solutions on outstanding issues. It has been widely reported that a compromise solution will remove the provisions that deny tax reliefs to identified ‘shell companies’ and will instead implement an exchange of information programme in respect of such entities. This proposal was included in list of pending tax proposals in the 2025 Commission Work Programme published on 11 February 2025.
Proposal for a Directive Laying Down Rules on a Debt-Equity Bias Reduction Allowance and on Limiting the Deductibility of Interest for Corporate Income Tax Purposes
Procedure reference: 2022/0154 (CNS)
Date published: 11 May 2022
The proposed directive (the "DEBRA directive") seeks to introduce two new tax measures: (i) an ‘allowance on equity’ that would provide a tax deduction to taxpayers that increase their equity capital compared to their previous tax year and (ii) a proposal to further refine the existing interest limitation rule. DEBRA is proposed to apply to all taxpayers subject to ‘corporate income tax’ in EU Member States. A number of exclusions are proposed, including exclusions for AIFs, UCITS, AIFMs, credit institutions, insurance undertakings, certain securitisation entities and other taxpayers.
Latest stage: The negotiation of this directive was temporarily suspended by the Council in December 2022 to be reassessed at a later date in the broader context of other reforms in the area of corporate taxation. On 16 January 2024, the European Parliament adopted its opinion formally approving the directive (this is non-binding but is to be considered by the Council). If the Council restart negotiations on this directive it must be approved unanimously by all EU Member States before it can be adopted into EU law. There is understood to be limited support amongst Member States for the proposal, so it is unlikely that progress will be made on the proposal in the short to medium term.
Matheson insight: DEBRA - potential new tax directive
Proposal for Council Directive amending three EU legislations ie Directive 2006/112/EC, Council Implementing Regulation (EU) 282/2011 and the Council Regulation on Administrative Cooperation (EU) 904/2010
Procedure reference: 2022/0407 CNS
Date published: 8 December 2022
On 8 December 2022, the Commission published its new EU VAT proposals on VAT in the Digital Age ("ViDA"). The ViDA proposal consists of amendments to three pieces of EU legislation: the VAT Directive (2006/112/EC), Council Implementing Regulation (EU 282/2011) and the Council Regulation on Administrative Cooperation (EU 904/2010). ViDA is divided into three main objectives –
(i) Digital reporting requirements (“DRR”) – these proposals aim to modernise the VAT reporting obligations by introducing digital reporting requirements that will standardise the information that needs to be submitted by taxpayers on each transaction to the tax authorities in an electronic format and at the same time it will impose the use of e-invoicing for intra-community transactions.
(ii) Platform economy – These proposals address the challenges of the platform economy, by updating the VAT rules applicable to the platform economy in order to address the issue of equal treatment, clarifying the place of supply rules applicable to these transactions and enhancing the role of the platforms in the collection of VAT when they facilitate the supply of short-term accommodation rental or passenger transport services.
(iii) Single VAT registration – These proposals aim to remove the need for multiple VAT registrations in the EU by improving and expanding the existing systems of One-Stop Shop (OSS) / Import One-Stop Shop and reverse charge in order to minimise the instances for which a taxpayer is required to register in another Member State.
Latest stage:
On 11 March 2025, the Council approved the ViDA initiative. On 25 March 2025, the ViDA package was published in the Official Journal of the European Union and the directive, regulation and implementing regulation will enter into force on 14 April 2025. The adoption of measures under ViDA will take place on a phased basis to 2035 and the Commission is set to release Working Papers for each pillar by Summer 2025. These Working Papers will aim to reflect the feedback gathered from Member States and provide further detail on the implementing regulations, explanatory notes, and timetables for the rollout of ViDA. While the regulations are directly applicable, the directive will have to be transposed into national law.
Implementation timeline:
1 July 2028: Single VAT registration
1 January 2030: Platform economy (voluntary application from 1 July 2028)
1 July 2030: Digital reporting requirements and e-invoicing (full Member State harmonisation from 1 January 2035)
Irish implementation: Whilst ViDA will now proceed towards domestic implementation in line with the required timeline, it is notable in an Irish context that Revenue launched a consultation on 10 October 2023 focussing on potential digital modernisation of Ireland’s domestic VAT invoicing and reporting system. This initial consultation covered the potential reform of Business to Business (B2B) and Business to Government (B2G) VAT reporting, supported by e-Invoicing. On 24 June 2024, Revenue published a report on this consultation, setting out a summary of the main points emerging from the submissions made (see here). Revenue have indicated that they will continue to engage with the VAT community and launch further public consultations on this topic. This engagement will help to shape Revenue’s future policies in relation to Ireland’s VAT invoicing and reporting system.
Matheson insight: Overview of ViDA Legislative Package
Proposal for a Regulation of the European Parliament and of the Council establishing the Union Customs Code and the European Union Customs Authority, and repealing Regulation (EU) No 952/2013
Procedure reference: 2023/0156 COD
Date published: 8 December 2022
In May 2023, the Commission published its proposals for significant reform of the EU Customs Union. The reforms are contained in draft Regulations and a draft Directive that will repeal and replace the current Union Customs Code. The proposed reforms include the introduction of a new EU Customs Authority; the introduction of an EU Customs Data Hub; the introduction of a customs 'One-Stop Shop'; new 'deemed importer' importer rules; a 'Trust & Check' traders programme; and the removal of the exemption from customs duty for goods valued below €150. The Commission notes that the EU Customs Data Hub will be live for e-commerce consignments in 2028, before opening to other importers in 2032. Overall, the Commission envisages a 10–15-year transition period for these reforms to come into effect, to ensure smooth introduction of the new measures without causing disruption to customs operations.
Latest stage: On 13 March 2024, the European Parliament adopted its first reading position on the proposal from the Commission. The file on the draft report will be followed up by the European Parliament following the Council’s first reading position.
The Council is conducting a technical analysis of the proposal through its Working Party on the Customs Union and a progress report was published during the Hungarian Presidency of the Council on 29 November 2024. This work will be continued by the Polish Presidency.
Proposal for a Council Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC9)
Procedure reference: 2024/0276 CNS
Date published: 28 October 2024
On 28 October 2024, the Commission adopted a proposal to further amend the Directive on Administrative Co-operation (Directive 2011/ 16/ EU) (“DAC9”). DAC9 provides for Pillar Two Top-up tax information returns to be exchanged between the competent authorities of Member States.
Article 44(2) of the Pillar Two Directive requires each constituent entity of a Pillar Two group that is resident in the EU to file a Top-up tax information return in the EU Member State where it is located. However, this requirement can be disapplied if the ultimate parent entity company (“UPE”) of the MNE group (or a designated filing entity) files a Top-up tax information return on behalf of the MNE provided the information is then exchanged by that jurisdiction with all other relevant jurisdictions (ie, those where constituent entities are located). This draft directive provides a framework to facilitate this central filing and exchange of information within the EU.
The Top-up tax information return must be filed within 15 months of the last day of the fiscal year to which it relates (although this is extended to within 18 months for the first fiscal year). Once the return is filed, the filing jurisdictions must exchange parts of the return with relevant Member States within three months:
- the UPE jurisdiction receives the full return;
- implementing Member States (ie, those that have implemented the Pillar Two Directive) receive the full General section of the return (which contains broad information on the MNE including its corporate structure and a summary of how the Pillar Two rules apply to the MNE;
- qualified domestic top-up tax-only Member States (ie, Member States that have implemented a qualified domestic top-up tax) where constituent entities of the MNE are located receive the relevant parts of the General section of the return; and
- Member States with taxing rights under the Pillar Two Directive receive jurisdictional sections (which contains detailed information on the application of the Pillar Two rules in that jurisdiction).
Where a jurisdiction that receives a return under the exchange arrangements considers that corrections are required to the return, they can notify the sending Member State
Latest stage: On 11 March 2025, the Council reached political agreement on DAC9. As a next step DAC9 will be formally adopted by the Council. After that, it will be published in the Official Journal and will enter into force on the day following that of its publication.
Member States will have to implement DAC9 by 31 December 2025. Countries opting to delay the implementation of the 'Pillar 2 Directive' are still required to transpose DAC9 by the same deadline.