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OECD releases Pillar Two model rules for domestic implementation of 15% global minimum tax
OECD releases Pillar Two model rules for domestic implementation of 15% global minimum tax

December 21, 2021

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The Organisation for Economic Cooperation and Development (OECD), on December 20, released detailed rules under Pillar Two for the proposed Global Anti-Base Erosion (GloBE) rules, which will introduce a global minimum corporate tax rate of 15%. The minimum tax will apply to Multi National Enterprises (MNEs) with revenue above EUR 750 million and is estimated to generate around USD 150 billion in additional global tax revenues annually.

Pillar Two model provide governments a precise template for taking forward the two-pillar solution to address tax challenges arising from digitalisation and globalisation of the economy agreed in October 2021 by 137 countries and jurisdictions under the OECD/G20 Inclusive Framework on BEPS.

The GloBE rules are intended to ensure large MNE groups pay this minimum level of tax on income arising in each jurisdictions in which they operate. The rules create a “top-up tax” to be applied on profits in any jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below the minimum 15% rate.

The new Pillar Two model rules will assist countries to bring the GloBE rules into domestic legislation in 2022. They provide for a co-ordinated system of interlocking rules that:

  • define the MNEs within the scope of the minimum tax;
  • set out a mechanism for calculating an MNE’s effective tax rate on a jurisdictional basis, and for determining the amount of top-up tax payable under the rules; and
  • impose the top-up tax on a member of the MNE group in accordance with an agreed rule order.

Pillar Two model rules also address the treatment of acquisitions and disposals of group members and include specific rules to deal with particular holding structures and tax neutrality regimes. The rules also address administrative aspects including information filing requirements and provide for transitional rules for MNEs that become subject to global minimum tax.

Next steps:

In early 2022, the OECD will release a Commentary relating to the model rules and address co-existence with the US Global Intangible Low-Taxed Income (GILTI) rules. This will be followed by development of an implementation framework focused on administrative, compliance and co-ordination issues relating to Pillar Two. The Inclusive Framework is also developing the model provision for a Subject to Tax Rule, together with a multilateral instrument for its implementation, to be released in the early part of 2022. This will be followed by public consultations on implementation framework and Subject to Tax Rule.

Copy of the Pillar Two model rules is attached for your reference.


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