IRELAND Trends and Developments Contributed by: Amelia O’Beirne and Trevor Glavey, A&L Goodbody
General Outlook Taxpayers are facing unprecedented challenges in the current business environment. Over the past 12 months alone, they have been confronted with trade wars, geopolitical tensions, inflation concerns, com - petitiveness constraints and instability in the interna - tional tax system. The recent outbreak of war in the Middle East has also added to the backdrop of gen - eral uncertainty for businesses. While GDP growth trends in the major economies and regions of the world were expected to hold steady for 2026 at 3% on average, bolstered by the performance of the US economy, these projections are currently being re-evaluated in light of recent developments. This is particularly so given the rapid rise in oil prices since the outbreak of the war in the Middle East. Where such price increases are not transitory, this may lead to the re-emergence of inflation, which would consti - tute a drag on economic growth prospects. In an Irish context, there remains cautious optimism for the year ahead, albeit more tempered than was the case at the beginning of the year. The concerns that were evident at the beginning of 2025 with respect to US tariffs (in particular on pharmaceutical compa - nies) have abated, with the tariff rate on Irish exports on average only approximately 3% higher than was the case prior to the current US administration taking office. Having weathered the tariff threat during the first half of 2025, the second half of the year in Ireland brought with it strong levels of economic activity. This was evidenced by significant levels of M&A activity, with in excess of 450 deals being completed in the Irish mar - ket in 2025. Even with the increased volatility of late, these elevated deal levels are nonetheless expected to continue in 2026, driven in particular by the antici - pated continued investment in artificial intelligence (AI) technologies and businesses. International Tax Developments At the international tax level, businesses need cer - tainty so that they are able to make decisions with confidence as to their tax consequences. Equally importantly, countries need to be able to offer incen - tives to businesses to:
• encourage them into areas where the market may not have adequately responded; and/or • enable smaller economies to sustainably and responsibly compete for foreign direct investment. In this respect, the release on 5 January 2026 of the OECD’s side-by-side package in respect of Pillar 2 brought welcome clarity. The package recognises that the US domestic tax regime can operate side-by-side with the OECD Pillar Two rules. As such, where a mul - tinational group has a US parent, the group may be excluded from the application of the income inclusion rule and the undertaxed profits rule under Pillar Two, subject to electing for a safe harbour and satisfying certain conditions. Qualifying domestic minimum top- up taxes remain untouched. On 8 January 2026, the European Commission issued a notice on the side-by-side package, confirming that it constitutes a “qualifying international agreement on safe harbours” under Article 32 of Council Directive (EU) 2022/2523 (ie, the “Pillar Two Directive”). For EU member states, the remainder of 2026 will be spent transposing the elements of the side-by-side pack - age, as necessary, into their domestic law. In Ireland, legislation will need to be introduced to give effect to the side-by-side package, and it is expected that implementing legislation will be published in late 2026, but with retrospective effect for accounting periods commencing on or after 1 January 2026. Taxpayers within scope of the rules should therefore continue to monitor domestic implementation throughout 2026. The progress made on the side-by-side package under Pillar Two stands in stark contrast to the current situation under Pillar One. Although jurisdictions such as Ireland and the USA have taken steps to implement Amount B, uptake generally has been slow. In addi - tion, negotiations with respect to Amount A appear to have stalled. Where no further progress is made in this area, the possibility of greater fragmentation of the international tax framework is possible, including the potential re-emergence of digital services taxes in some jurisdictions. Outside the two OECD Pillars, the Draghi Report in September 2024 clearly highlighted the competi - tiveness issues faced by the EU. It is hoped that the
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