The OECD issued technical guidance for the implementation of the global minimum tax
On 2 February 2023, the Organisation for Economic Cooperation and Development (OECD) and G20 Inclusive Framework was published as a technical guidance on Pillar 2 of the base erosion and profit shifting initiative, aiming to establish a framework for a global tax system, which will apply a minimum tax rate of 15 per cent for multinational enterprises (MNEs).
The administrative guidance (the Guidance) for the pillar two, global anti-base erosion rules (GloBE Rules), will help businesses apply the global minimum corporate tax rules from the beginning of 2024, with coordinated outcomes and greater certainty, ensuring that the tax is administered in a fair and efficient manner. The Guidance covers a wide range of issues, including how the minimum tax rate should be calculated and which companies should be subject to it. In this respect, the Guidance proposes that the minimum tax should apply to large MNEs with global revenue above a certain threshold. This would ensure that the tax only applies to companies that have the capacity to engage in aggressive tax planning and profit shifting.
The Guidance also operates as a general guidance on the scope and transitional elements of the GloBE Rules to allow Inclusive Framework members that are in the process of implementing the rules to incorporate the Guidance in their national legislation in a harmonised method.
Moving forward, the Inclusive Framework will continue releasing further administrative guidance to ensure that the GloBE Rules are implemented efficiently and to tackle issues requiring clarification and simplification. In addition, the Inclusive Framework expects to finalise the model provision for the subject to tax rule and the relevant multilateral instrument to help with its implementation, while under pillar one technical work is still ongoing with the aim of finalising a new Multilateral Convention by mid-2023 for entry into force in 2024.
The administrative guidance for the pillar two GloBE Rules can be found here.
OECD’s press release can be found here.