Finance (No. 2) Bill 2023: Impact on Financial Services

Pillar Two

This year’s bill is one of the largest Finance Bills put forward in some time, running to 98 sections and 270 pages, primarily due to the implementation of the EU Minimum Tax Directive and the OECD Model Rules with regard to Pillar Two. Pillar Two seeks to ensure that large groups (i.e. groups with turnover of €750m or more in at least two of the last four years) incur a minimum 15% effective tax rate on a jurisdiction by jurisdiction basis.

For more information on the Pillar Two provisions contained in the Finance Bill see our detailed analysis.

Outbound Payments

In July, the Department of Finance published a Feedback Statement on proposed new legislation to be introduced applying to interest, royalties and dividends to prevent double non-taxation. Finance (No. 2) Bill 2023 contains the updated draft legislation, following receipt of submissions to the feedback statement. This draft legislation contains a number of significant, and indeed welcome, changes from the previous draft published.

For more information on the new rules contained in the Finance Bill for outbound payments see our detailed analysis.


In recent years, there has been extensive engagement between the leasing community and Revenue and the Department of Finance. Through this engagement, Revenue have signalled their intention to withdraw many of their historic leasing practices from the end of this year, and to put those which they wish to retain on a statutory footing.

The Finance Bill contains a number of complex changes to the taxation of leasing activities including:

  • Amendments to the calculation of profits of a trade such that the income from a lease (in the case of a lessor) and the lease rental payments (in the case of a lessee) are generally to be spread evenly over the life of the lease, irrespective of how the transaction is recorded in the company’s accounts.
  • Amendments to allow accounting rules to be used for leases that meet a threshold for being treated as financing transactions (i.e. those where the burden of wear and tear falls on the lessee).
  • Correction of a drafting error relating to the tax treatment of non-trading lessors.
  • Amendments to the leasing ring-fence provisions.

Qualifying Financing Companies

The Finance Bill introduces new rules allowing for interest deductibility for a “qualifying finance company” once certain criteria are met. A qualifying financing company is one which obtains third-party finance and advances this finance to a subsidiary for a qualifying business purpose.

The Minister for Finance, Michael McGrath, in his Budget Day speech announced his commitment to engaging with stakeholders in the period ahead on Ireland’s current regime for interest deductibility, noting its complexity. The introduction of these new rules is a very welcome development and hopefully represents a first step in the simplification and modernisation of Ireland’s interest deductibility rules.

Banking Levy

As announced on Budget Day, Finance (No. 2) Bill 2023 contains the legislation for the introduction of a revised form of bank levy for 2024. The revised levy is to apply to AIB, Bank of Ireland, EBS and PTSB. The levy will be applied at the rate of 0.112% of the value of deposits held by each bank on 31 December 2022, to the extent that such deposits are “eligible deposits” within the meaning of the European Union (Deposit Guarantee Schemes) Regulations 2015.

It is expected that the amount of levy collected in 2024 will be in the region of €200 million.


  • Amendments to FATCA and CRS rules to ensure that Revenue can apply penalties in certain situations where a reporting financial institution is a legal arrangement, such as a trust or a partnership.
  • Amendment to ensure that the way in which Dividend Withholding Tax (“DWT”) applies to a pension fund established in a country with which Ireland has a Tax Information Exchange Agreement is no less favourable than how it applies to an equivalent Irish pension scheme.
  • Provision for an exemption from Stamp Duty on certain transfers of Irish shares in the US or Canada. The exemption will apply to shares listed on a recognised stock exchange located in the US or Canada and the trade must be settled through a securities settlement system located in the US or Canada. The amendment puts an administrative practice of Revenue on a statutory footing.
  • Removal of the word “issuing” from the description of financial activities subject to VAT exemption. This amendment brings Irish legislation in line with the European VAT Directive and is consistent with EU case law.

For more specific changes included in the Finance (No.2) Bill 2023, read the following expert insights:

Get in touch with our Financial Services Tax Team if you have any questions on what the Finance (No. 2) Bill 2023 means for you or your business.