Pascal Saint-Amans, the former Director at the OECD Centre for Tax Policy and Administration who during his time at the OECD spearheaded the BEPS negotiations recently commented that 'if we remove the UTPR we no longer have a global minimum tax' when discussing the Trump Administration's opposition to the rule. Can you explain how the UTPR works and how important its role is for the overall BEPS project?
The legislation in Part 4A TCA 1997 provides Undertaxed Profits Rule (UTPR) as well as Income Inclusion Rule (IIR) top-up tax and domestic top-up tax.
Each of these three taxes are included in Pillar Two rules, which provide that income of large groups is taxed at a minimum effective tax rate of 15% on a jurisdictional basis.
The Minimum Tax Directive provides for a European Union (EU) wide implementation of Pillar Two of the Organisation for Economic Co-operation and Development's (OECD's) Two Pillar solution.
The UTPR top-up tax rule is a secondary taxing rule designed to operate as a backstop to the IIR top-up tax. It ensures that top-up tax is allocated to group entities in implementing jurisdictions. The tax may apply if a group does not have a parent company in a jurisdiction that has implemented Pillar Two.
The UTPR comes into effect for fiscal years commencing on, or after, 31 December 2024. However, it may apply on, or after, 31 December 2023 in certain limited circumstances.
The rules apply to Multinational Enterprises groups or large-scale domestic groups. These rules apply where the revenue of the group exceeds €750m in two of the previous four fiscal years. For the purpose of the domestic top-up tax, Part 4A extends the rules to standalone entities that meet the revenue threshold. Certain entities, referred to as excluded entities, are outside the scope of the rules.
The legislation in Part 4A TCA 1997 provides Undertaxed Profits Rule (UTPR) as well as Income Inclusion Rule (IIR) top-up tax and domestic top-up tax.
Each of these three taxes are included in Pillar Two rules, which provide that income of large groups is taxed at a minimum effective tax rate of 15% on a jurisdictional basis.
The Minimum Tax Directive provides for a European Union (EU) wide implementation of Pillar Two of the Organisation for Economic Co-operation and Development's (OECD's) Two Pillar solution.
The UTPR top-up tax rule is a secondary taxing rule designed to operate as a backstop to the IIR top-up tax. It ensures that top-up tax is allocated to group entities in implementing jurisdictions. The tax may apply if a group does not have a parent company in a jurisdiction that has implemented Pillar Two.
The UTPR comes into effect for fiscal years commencing on, or after, 31 December 2024. However, it may apply on, or after, 31 December 2023 in certain limited circumstances.
The rules apply to Multinational Enterprises groups or large-scale domestic groups. These rules apply where the revenue of the group exceeds €750m in two of the previous four fiscal years. For the purpose of the domestic top-up tax, Part 4A extends the rules to standalone entities that meet the revenue threshold. Certain entities, referred to as excluded entities, are outside the scope of the rules.