OECD: Submission on Pillar One Amount A: Tax Base Determination

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OECD: Submission on Pillar One Amount A: Tax Base Determination

Tejasvi

@tejasvi

March 7, 2022

Public Policy

229

The OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) has been working to develop a consensus based solution to address tax challenges arising out of digitalisation of the economy.

Amount A of Pillar One has been developed as part of the solution. It introduces a new taxing right over a portion of the profit of large and highly profitable enterprises for jurisdictions in which goods or services are supplied or consumers are located. In this regard, the OECD released e consultation paper consisting of draft Model Rules for tax base determination.

Based on inputs from Industry, NASSCOM made a detailed submission to the OECD and MoF on March 4, 2022. As part of our submission, we have requested that an opportunity be provided to stakeholders to provide inputs on unresolved issues / policy decisions/component which will be clarified in commentary once consensus has been reached. We have also requested OECD to:

Provide an exhaustive list of expenses that will be disallowed while calculating the financial accounting profit (or loss);
Include ‘profit shortfalls’ for carry forward purposes;
Include all kinds of divisions/demergers within the definition of Eligible Division (which is still under discussion);
The term “Eligible Business Combination” under Title 9 – Definitions should be expanded to include other possible forms of business combinations and not be restricted to the two options mentioned in the consultation paper (i.e., business combinations that involve either the transfer of a stand-alone entity (i.e., an entity that was not a member of another Group), or the transfer of all or substantially all the assets and liabilities of a Group);
Flexibility should be provided for use of other allocation keys for division of transferable losses. Such keys could include value of intangible assets, value of contracts, composition of workforce transferred (number of personnel X compensation); and
Keep the definition of ‘same or similar business’ broadly inclusive to cover cases where businesses are reasonably similar, ancillary, incidental, complementary or related to, or a reasonable extension, etc. of, the current business.

Our detailed submission to OECD and MoF is attached for your reference. For more information, reach out to tejasvi@nasscom.in and jayakumar@nasscom.in.

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Tejasvi