Securitisation & QDTT
Securitisation & QDTT
Finance Bill 2024 introduces a partial exemption from Qualifying Domestic Top-Up Tax (QDTT) for ‘securitisation entities’. Can you explain how the partial exemption will work?
BEPS Pillar II establishes a global minimum tax rate of 15%, which applies to multinational enterprise (“MNE”) groups with global revenues of €750 million or more. As part of its implementation of Pillar II, Ireland introduced a Qualifying Domestic Top-up Tax (QDTT), which acts as a safe harbour provision under the Pillar II framework.
On June 17, 2024, the Organisation for Economic Co-operation and Development (“OECD”) released additional Administrative Guidance on the Global Anti-Base Erosion (“GloBE”) Rules under Pillar II. This guidance addressed several key areas, including the treatment of securitisation entities. The OECD’s guidance was subsequently incorporated into Irish law through Finance Bill 2024.
The OECD guidance presented three approaches for the treatment of securitisation entities under Pillar II:
Under Finance Bill 2024, any securitisation entity that is part of a large multinational group subject to Pillar II will no longer be liable for QDTT although being under the scope of QDTT. This reflects the “Inclusion with Tax Collection” approach put forward by the OECD.
In this scenario, the QDTT liability will be borne by other constituent entities of the MNE group. The tax burden is to be pro-rated based on the income of the entities within the jurisdiction, excluding the securitisation entity. If there are no other constituent entities in the group, the QDTT will apply to the securitisation entity in the same way as it applies to other entities.
Contributor: Tatheer Fatma, Manager, Financial Services Tax
BEPS Pillar II establishes a global minimum tax rate of 15%, which applies to multinational enterprise (“MNE”) groups with global revenues of €750 million or more. As part of its implementation of Pillar II, Ireland introduced a Qualifying Domestic Top-up Tax (QDTT), which acts as a safe harbour provision under the Pillar II framework.
On June 17, 2024, the Organisation for Economic Co-operation and Development (“OECD”) released additional Administrative Guidance on the Global Anti-Base Erosion (“GloBE”) Rules under Pillar II. This guidance addressed several key areas, including the treatment of securitisation entities. The OECD’s guidance was subsequently incorporated into Irish law through Finance Bill 2024.
The OECD guidance presented three approaches for the treatment of securitisation entities under Pillar II:
- No Action: securitisation entities remain subject to QDTT if they are part of an MNE group covered by Pillar II.
- Inclusion with Tax Collection: securitisation entities are included under the QDTT rules, but any applicable top-up tax is collected from another group member located in the same jurisdiction.
- Exemption: securitisation entities are excluded from the QDTT rules and are not considered constituent entities under the provision.
Under Finance Bill 2024, any securitisation entity that is part of a large multinational group subject to Pillar II will no longer be liable for QDTT although being under the scope of QDTT. This reflects the “Inclusion with Tax Collection” approach put forward by the OECD.
In this scenario, the QDTT liability will be borne by other constituent entities of the MNE group. The tax burden is to be pro-rated based on the income of the entities within the jurisdiction, excluding the securitisation entity. If there are no other constituent entities in the group, the QDTT will apply to the securitisation entity in the same way as it applies to other entities.
Contributor: Tatheer Fatma, Manager, Financial Services Tax