Taxes Consolidation Act 1997 section 111AAD

Determining top-up amounts of qualifying entity

Section 111AAD sets out how the domestic top-up tax of a qualifying entity is determined, by applying the general top-up tax rules in Chapters 3 to 8 with a series of specific modifications, including the use of local accounting standards, adjustments for standalone entities, an initial phase exclusion, and transitional rules for entities newly subject to an IIR or UTPR.

• Chapters 3 to 8 apply to calculate domestic top-up tax in the same way as they apply to calculate the top-up tax of a constituent entity, but with a number of important modifications — including replacing references to constituent entities with qualifying entities, disabling certain provisions on eligible distribution tax systems and domestic top-up tax safe harbours, and restricting how covered taxes are allocated.
• Where certain conditions are met, qualifying entities may use a local accounting standard (such as Irish GAAP or IFRS as adopted in the State) rather than the group's consolidated accounting standard to determine their financial accounting net income or loss; a tie-breaker test applies where an entity prepares accounts under more than one local standard.
• For standalone entities (those within section 111AAB(1)(c)), additional modifications apply — references to group membership are read as references to the qualifying entity, references to consolidated financial statements are read as references to the entity's own standalone accounts, and a number of provisions that are only relevant to group structures are disapplied entirely.
• An initial phase exclusion reduces the domestic top-up tax to zero for the first five years after a group or standalone entity first comes within scope of Pillar Two; separate transitional rules apply where an entity later becomes subject to a qualified IIR or UTPR in a jurisdiction, resetting certain deferred tax attributes and carry-forwards at the beginning of the new transition year.