Joe Walsh, Tax Director, Forvis Mazars: The Non-Discrimination Article (Article 25) of the Ireland/US double taxation treaty (the Treaty), based on the US Model Treaty, mandates that Irish companies wholly or partly owned by US residents shall not face any taxation or related requirements in Ireland that are different or more burdensome than those faced by companies owned by Irish residents.

Pillar II Implications: An Irish-owned MNE Group would be subject to Pillar II through the Qualified Domestic Minimum Top-up Tax (QDMTT) on domestic undertaxed profits and the Income Inclusion Rule (IIR) on any undertaxed profits of its subsidiaries. Conversely, a US-owned Irish company would be subject to the QDMTT on domestic undertaxed profits, the IIR (as an intermediate parent) on any subsidiary undertaxed profits, and from 2025, the Undertaxed Payments Rule (UTPR) on any undertaxed group profits. The UTPR aims to ensure a level playing field regardless of where a group is headquartered and to prevent MNE Groups from relocating operations to jurisdictions that have not implemented Pillar II to avoid paying top-up taxes.

While the total Pillar II tax payable by the MNE Group should not differ based on whether they are Irish-owned or US-owned and is therefore not more burdensome, the Trump Administration may emphasise that the mechanism for collecting the top-up taxes differs depending on the ownership of the MNE Group. This could be seen as conflicting with the Non-Discrimination Article.

Remedies Under the Treaty: Taxpayers who believe they are not being taxed in accordance with the Treaty can seek remedies under Irish domestic law by taking a case to the Tax Appeals Commission and/or through the Courts. Alternatively, they can seek assistance from the US Competent Authority under the Mutual Agreement Procedure in Article 26 of the Treaty.

Termination of the Treaty: The Treaty does not provide a direct mechanism for the US Government to challenge the Irish taxation system. However, the US can terminate the Treaty by giving at least six months’ notice. A recent example is the termination of the US-Hungary tax treaty, effective from January 2024, due to perceived inequities and Hungary’s opposition to Pillar II.

Peter Reilly, Tax Policy Leader, PwC Ireland: The Pillar Two framework has arguably become too unwieldy and complicated which has created a significant compliance burden on taxpayers. Therefore, simplification of the Global Minimum Tax rules is the primary action that needs to happen as soon as possible. This should include permanent simplifications in the GloBE rules beyond the transitional phase, and concerted international efforts to simplify reporting requirements.

Currently, reporting under Pillar Two requires the collection of hundreds of data points for each entity in a group which is a costly exercise for taxpayers. The Pillar Two framework needs to be significantly simplified to make it easier for MNEs to comply and report under the GloBE rules, with an effective permanent safe harbour to be internationally agreed and put in place as soon as possible.

In terms of the report from the Treasury, we will need to wait to see what it contains. Clearly there are aspects of the rules that the US does not like, including the UTPR, but how far their displeasure goes and the actions that could be taken to satisfy the US is hard to tell at present.

This article appeared in the March 2025 edition of the Irish Tax Monitor.