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OECD: Submission on Progress Report on administration and tax certainty aspects of Pillar One
OECD: Submission on Progress Report on administration and tax certainty aspects of Pillar One

November 11, 2022

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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 for addressing the tax challenges arising from the digitalisation of the economy. It introduces a new taxing right over a portion of the profit of large and highly profitable enterprises (Covered Groups) for jurisdictions in which goods or services are supplied or consumers are located (market jurisdictions).

The Progress Report is a consultation document released by the OECD Secretariat for the purposes of obtaining further input from stakeholders on the draft rules on administration of the new taxing right as well as provisions on tax certainty that have been developed by the OECD.

Based on inputs from Industry, NASSCOM made a detailed submission to the OECD and MoF. As part of our submission, we have requested OECD to:

  1. Specify that Amount A profit in a jurisdiction should be taxed at the corporate tax rate applicable to domestic corporations in that jurisdiction.
  2. Where covered group has presence in a market jurisdiction, Amount A allocation should be added to the income of those local entities and corresponding tax liability should also be discharged by those entities
  3. Streamlined compliance should be made available to liable entity even if it is having presence in market jurisdiction through permanent establishment (branch). This will not put the covered group having branch structure at disadvantage as compared to the covered group having purely market presence.
  4. OECD should provide illustrations on the use of four different approaches for identifying relieving entities.
  5. There should be no specific tax consequences attached to the entity that is functioning as an agent (such as transfer pricing, withholding taxes, etc.). OECD should introduce necessary guardrails to protect the agent entity.

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


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