Contents
General
The Spring Finance Bill 2023 (Finance (No. 2) Bill) was published yesterday (March 23, 2023), along with its Explanatory Notes. The Bill includes provisions to implement key aspects of the Pillar Two Global Minimum Tax for accounting periods beginning on or after 31 December 2023.
This follows the original draft legislation published on July 20, 2022.
The Undertaxed Profits/Payments Rule was not included in the Bill, however this is not unexpected as it was announced in the Autumn Statement that this will apply no earlier than accounting periods beginning on or after 31 December 2024.
The draft legislation is very comprehensive and, as expected, covers relevant aspects of the OECD Model Rules, Commentary and other Published Guidance.
In particular it, provides for an Income Inclusion Rule (named the Multinational Top-Up Tax) and a Domestic Top-Up Tax (which is likely to be a Qualified Domestic Minimum Top-Up Tax).
The UK Bill is the most comprehensive law we have seen to date to implement the Pillar Two Global Minimum Tax. It closely follows the OECD Model Rules and reflects the latest guidance, including aspects of the OECD Safe Harbours Guidance and the Administrative Guidance.
It is worth noting at the outset that Section 255 of the Bill specifically refers to the OECD Model GloBE Rules and Commentary (including the OECD Examples) and directly applies them in various aspects of the application of the Multinational Top-Up Tax.
In addition, it applies ‘any further commentaries or guidance published from time to time by the OECD that are relevant to the implementation of the Pillar Two model rules’.
This would, therefore, include the OECD Administrative Guidance that will itself be included in an updated version of the OECD Commentary.
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On May 2, 2024, the Estonian Official Gazette enacted the ‘Act supplementing the Tax Information Exchange Act, the Tax Administration Act and the Income Tax Act’ to implement Article 50 of the EU Minimum Tax Directive.
Analysis of the implementation of the Pillar Two GloBE rules for Canada, updated for the Budget Implementation Bill, 2024, No. 1, issued on April 30, 2024.
Whether multinationals adopt a centralized or decentralized approach to Pillar Two will be one of the key factors in correctly establishing the systems and architecture to collect, manage, analyse and store source data for the Pillar Two effective tax rate and top-up tax calculation.
The Pillar Two effective tax rate (ETR) calculation for investment entities is similar to the standard ETR calculation, however, there is an important twist in that the top-up tax is adjusted for minority interests. There is no adjustment for minority interests under the standard ETR calculation. In this article we look at the impact of this.
On April 25, 2024, the Polish Ministry of Finance issued a draft law to implement the EU Minimum Tax Directive into domestic law. Read our review of the draft law.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules in Poland on or after January 1, 2025. Updated for the draft legislation issued by the Polish Ministry of Finance on April 25, 2024.
The tax data mapping assessment is the cornerstone for MNEs looking to implement an effective approach to manage Pillar Two. All systems changes flow from this.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules in Barbados for accounting periods beginning on or after January 1, 2024. Updated for the draft legislation being considered by the Barbadian Parliament.
The Pillar Two rules include specific rules for Joint Ventures (JVs) that would otherwise not be within the scope of Pillar Two due to not being consolidated in the financial accounts of the MNE group. However, of more interest is how the amount of top-tax tax (and by implication the amount not collected) varies depending on the JV group structure. Read more in this article.
MNE groups should pay careful attention to any group financing companies in light of the Pillar Two Rules. In this analysis we look at the impact of Pillar Two under for both general GloBE and QDMTT purposes.
On March 22, 2024, the Decree of the Ministry of Economy and Finance No. 1048, to amend the Enforcement Regulations of the International Tax Adjustment Act entered into force.
On March 22, 2024, the Enforcement Regulations to the International Tax Adjustment Act were amended. This includes attachments for the GIR (in English and Korean), the GloBE Tax Return and the Notification Form for a Foreign CE to File the GIR.
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