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Major Shift in Ireland’s Corporate Tax Landscape as OECD Agreement Takes Effect

Dublin: The country has ushered in a significant change in its corporate tax rates, aligning with the OECD agreement system signed by Ireland. The revised tax structure, a result of the 2021 OECD agreement, is now in force, impacting hundreds of companies in the nation and marking the most substantial increase in corporate tax rates in the past three decades.

Under the OECD agreement, which Ireland became a signatory to in 2021, the minimum tax rate for large multinational companies has been set at 15%. Approximately 1,600 multinational companies in Ireland are expected to be affected by this adjustment. Notably, Ireland has maintained a 12.5% corporate tax rate for the past two decades. Ireland is one of 140 countries that have endorsed the OECD agreement.

Companies with a turnover exceeding Rs 750 crore in at least two of the last four years will now be obligated to pay a top-up tax. However, the government has granted the majority of businesses in Ireland a two-year grace period, allowing them to continue benefiting from the 12.5% tax rate until 2026.

Historically, low-tax jurisdictions such as Ireland have been criticized for providing favorable conditions for tech giants to maximize profits. In response to global concerns, the OECD has instigated a comprehensive overhaul of corporate tax regulations. The implementation of the new tax rate is anticipated to bring significant financial benefits to Ireland, a development welcomed by Finance Minister Michael McGrath.

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