Peter McGeoghegan, Director, Financial Services Tax, Grant Thornton:: The OECD published a fourth set of Administrative Guidance in June 2024, which addressed a number of areas including the treatment of securitisation vehicles. This guidance provided that a jurisdiction could choose between various options when applying QDTT to securitisation entities:
1. Bring securitisation entities within the scope of QDTT and the QDTT Safe Harbour; or
2. Leave securitisation entities outside the scope of QDTT (in which case the Safe Harbour “switch-off” would apply); or
3. The OECD Guidance states that if a jurisdiction includes securitisation entities within the scope of its QDTT, but contains provisions to impose any top-up tax relating to the securitisation entity on either:
• Another constituent entity of the MNE Group that is not a securitisation entity, or
• The securitisation entity itself if the top-up tax cannot be otherwise collected, the MNE Group would be allowed to apply the QDTT Safe Harbour for that jurisdiction. This is the direction Ireland has chosen.

A new section 111AAC(4)(a) and (b) TCA 1997 has been introduced in Finance Act 2024 which implements this option in relation to securitisation entities in Ireland.

1. Where a securitisation entity is a member of an MNE group, QDTT will not be imposed on that securitisation entity but will be allocated to other members of the group located in Ireland that are not securitisation entities, based on their proportionate share of qualifying income.
2. If there are no other such members of the group, QDTT will be charged on the securitisation entity itself, ensuring the “switch-off rule” is not utilised when applying the QDTT Safe Harbour.

It is important to note that as the legislative definition of securitisation is specific, it will not necessarily apply to all Section 110 registered companies or special purpose vehicles (SPV).

This approach to securitisation entities is retrospectively effective for fiscal years commencing on or after 31 December 2023.

This amendment is welcome and reflects that the Irish Government are keen to ensure the Irish legislation is kept up to date with the ever-increasing rounds of guidance being published by the OECD.

Tatheer Fatma, Manager, Financial Services Tax, BDO: 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.

To provide context, a securitisation entity in Ireland is a tax-neutral entity that holds qualifying assets for investors outside the group. These assets are legally segregated into identified pools, generating both interest income and expense. Under Irish tax law, a securitisation Entity can deduct interest expenses and pay taxes only on the remaining profits from interest earned on these qualifying assets, subject to specific conditions.

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.

This article appeared in the November 2024 edition of the Irish Tax Monitor.