December 31, 2022: South Korea
On December 31, 2022, South Korea passed Law 19191 to amend the International Tax Adjustment Act to provide for the Pillar Two Global Minimum Tax from January 1, 2024.
The previous draft law was not amended.
See:
English Translation of South Korean Pillar Two Law
First Domestic Pillar Two Global Minimum Tax Law Enacted
Analysis of South Korea’s draft Pillar Two Decree
The South Korean PE Risk Under Pillar Two
December 22, 2022: European Union
On December 15, 2022, the Council of the European Union formally adopted (among other things) the EU Pillar Two directive. See: Poland Withdraws its Veto and the EU Pillar Two Directive is Adopted.
On December 22, 2022 the EU Global Minimum Tax Directive was published in the EU official journal as Council Directive (EU) 2022/2523 of 14 December 2022. Date of entry into force: 23 December 2022.
EU member states are required to enact laws, regulations and administrative provisions necessary to comply with the EU Pillar Two Directive by 31 December 2023.
The Income Inclusion Rule will apply in the EU for fiscal years beginning from December 31, 2023 and the Under-Taxed Payments Rule will apply for fiscal years beginning from 31 December 2024.
See our Articles: Full Steam Ahead For EU Pillar Two Implementation and Review of the Draft EU Pillar Two Directive
December 21, 2022: USA
On December 21, 2022, the Congressional Research Service updated its policy document: The Pillar 2 Global Minimum Tax: Implications for U.S. Tax Policy following the EU adoption of the Global Minimum Tax Directive.
See: U.S Updates its GloBE Impact Document
December 20, 2022: Indonesia
The Indonesian Ministry of Finance May 19 announced its readiness to implement OECD’s two-pillar approach, effective from 2023. The announcement includes the Ministry’s support of: 1) the implementation of OECD’s two-pillar approach for fair and efficient taxation; and 2) a 15 percent global minimum tax on the annual revenue of multinational entities to reduce the base erosion and profit shifting (BEPS) risks.
In December 2022, the Indonesian government announced that legislation to implement of Pillar Two will begin in 2023:
On December 20, 2022, Indonesia issued Government Regulation No. 55/2022 on the Adjustment of Regulations in the Field of Income Tax. This included reference to the implementation of a global minimum tax in Indonesia as well a a desire to implement Pillar One:
Indonesian Regulation Signals Global Minimum Tax Implementation
December 16, 2022: Japan
On December 16, 2022, the ruling coalition issued the draft tax reform outline for 2023. This indicates that draft legislation to incorporate an the income inclusion rule based on the OECD Model Rules will be put forward in 2023.
See: Japans Pillar 2 Proposals in its 2023 Tax Reform Outline
December 16, 2022: Liechtenstein
In a press release issued on December 16, 2022, the Liechtenstein government announced the GloBE rules are to be introduced from January 1, 2024.
Liechtenstein announced it is to issue a consultation on a Pillar Two Global Minimum Tax in March 2023. See:
Liechtenstein to Consult on Pillar Two Global Minimum Tax
December 16, 2022: Switzerland
The Federal Council decided to implement the minimum tax rate agreed by the OECD and G20 member states by means of a constitutional amendment. Based on that decision, a temporary ordinance should ensure that the minimum tax rate can come into force on 1 January 2024. The law will be enacted subsequently in the conventional manner.he Federal Council decided to implement the minimum tax rate agreed by the OECD and G20 member states by means of a constitutional amendment.
See:
Analysis of Switzerlands draft pillar two decree
A constitutional amendment is required to implement differentiated company taxation. Voters are expected to have their say on June 18, 2023. A transitional ordinance, which has already been put out to consultation, should then ensure that the minimum taxation comes into force on January 1, 2024. The corresponding law will be adopted at a later date.
On Friday, 16 December 2022, in the final vote, the Swiss parliament has approved the proposal of the Federal Council to amend the constitution. See: Switzerland Approves the GloBE Rules.
December 14, 2022: Taiwan
Taiwan’s Ministry of Finance has stated it will prepare draft legislation for the government to increase Taiwan’s domestic minimum tax rate from 12% to 15%, as permitted under Article 8 of the Basic Income Tax Regulations.
However, this creates a number of issues in terms of its interaction with the Pillar Two global minimum tax (全球最低稅). See:
Taiwan To Increase Its Domestic Minimum Tax Rate From 2024
October 24, 2022: The Netherlands
The Dutch Government released draft legislation on the Pillar Two GloBE Rules for consultation on October 24, 2022.
See: Key Takeaways From the Dutch Draft Pillar Two Legislation
October 21, 2022: Mexico
The Mexican Treasury has confirmed that during 2023 it will continue working on the legislative framework that will govern the implementation of the global minimum tax, so that it can be implemented in 2024.
https://www.milenio.com/negocios/estiman-impuesto-minimo-global-implementara-mexico-2024
October 18, 2022: Ireland
The Irish Finance Bill 2022 was published on 18 October 2022 and includes some key changes to the Irish corporation tax system to take account of the Pillar Two rules.
See our article: Irish 2022 Finance Bill Changes for Pillar Two
On 27 September 2022, the Irish Minister for Finance presented Budget 2023 (the “Budget”) which included a statement reaffirming Ireland’s commitment to the OECD’s proposed global minimum effective corporate tax rate (“Pillar Two”). Importantly, the Minister also signposted a number of amendments and ongoing work to better align Ireland’s corporation tax system with the Pillar Two rules, which are currently expected to be implemented by 31 December 2023.
The following reformative measures were highlighted in the Budget in relation to the implementation of Pillar Two in Ireland:
Research and Development (“R&D”) tax credit:
The existing R&D tax credit will be amended to ensure that it is a qualifying refundable tax credit for Pillar Two and US foreign tax credit purposes. A company will now have an option to request payment of the credit without offsetting it against other tax liabilities first. In addition, the current limits on the payable element of the credit will be removed. Transitional measures will be in place for one year to assist the transition to the new payment system for companies that are already engaged in R&D activities.
Knowledge Development Box (“KDB”):
The KDB (ie, Ireland’s patent box) will be extended to accounting periods commencing before 1 January 2027 and the effective rate will be increased to 10% (from 6.25%) to align with the Pillar Two ‘subject to tax rule’ once agreement is reached at OECD/G20 level on implementation. There were no details on any other changes to seek to align the KDB (which reduces a taxpayer’s effective tax rate by way of tax deduction) with Pillar Two more generally.
Territorial tax system:
The Minister confirmed that, in conjunction with Pillar Two implementation, the options for a move towards a territorial corporation tax system are being given serious consideration. The introduction of a dividend participation exemption and a foreign branch exemption would better accommodate the implementation of the Pillar Two rules by providing more clarity and less complexity.
Irelands Department of Finance, announced that Finance Minister Paschal Donahoe has opened a consultation on the implementation of a 15 percent global minimum corporation tax. In October 2021, Ireland, along with over 130 countries in the OECD/G20 Inclusive Framework, signed an agreement to reform the international tax framework as it applies to large corporate groups. The consultation document states it is likely that there will be four key elements of Pillar II, including:
• Income Inclusion Rule;
• Undertaxed Profits Rule;
• Qualified Domestic Top-Up Tax; and
• Subject to Tax Rule.
The purpose of the consultation is to “seek views on the implementation of the Model Rules and proposed EU Directive in domestic Irish legislation.” The consultation document clarifies that it is “not the purpose of this consultation to obtain views on the policy and design of the rules themselves.”
The consultation period ran from May 26, 2022 through July 22, 2022.
The Irish Government April 14 opened a consultation on the R&D tax credit and the Knowledge Development Box (KBD) under the OECD BEPS two-pillar approach. Topics covered include: 1) the tax treatment of qualified refundable R&D tax credits as income under the pillar two solution; 2) potential changes to the R&D credit procedures; and 3) issues and potential improvements to the KBD. Comments were due by May 30.
October 4, 2022: Australia
On October 4, 2022, the Australian Treasury issued a consultation paper, primarily on Pillar Two of the OECD Two-Pillar Solution. It includes some details on Pillar One, but acknowledges that Pillar One is still subject to discussion internationally and a number of key design elements are being debated.
The Australian Government has committed to taxing multinationals in Australia at rates that ensure an effective tax rate of at least 15% on global profits is levied, in line with Pillar Two. Australia already levies corporate income tax at a comparably high rate of 30%.The OECD has released technical guidance relevant to the implementation of this measure, designed to promote consistency in the interpretation of the rules.
Although the practical detail of how the measure will be adopted in Australia is not yet available, it is expected to come into effect in 2024, in line with the OECD’s current timetable.
See our Article: Australia’s Consultation on Pillar Two
September 10, 2022: Barbados
The Director of the International Business Unit (IBU) in the Ministry of Energy and Business Development stated the government has designed a plan on how the principle of a global minimum tax rate will be applied in practice in Barbados. This plan comprises a few options and is currently being discussed at the highest level.
On September 10, 2022, it was reported that Barbados is to ask the OECD for more time to implement the GloBE Rules. See:
Barbados to ask for more time for Global Minimum Tax
August 4, 2022: Vietnam
On 4/8/2022, the Prime Minister issued Decision No. 55/QD-TTg establishing the Prime Minister’s Special Working Group on researching and proposing solutions related to the OECD global minimum tax.
In Vietnam, tax incentives are still the main policy tool to attract FDI. Therefore, when applying the global minimum tax, it will limit the ability of countries to use tax incentives to compete for investment.
For example, by investing in Vietnam, Samsung, Panasonic, and Intel have enjoyed many investment incentive policies, including corporate income tax incentives, with the most favorable rate under current regulations – a corporate income tax rate of 10% for 10-15 years, exemption for four years, and a reduction of 50% for the next nine years.
Vietnam is therefore considering how to amend its tax incentive regime in a post Pillar Two environment.
See: The Thorny Issue of Pillar Two in Vietnam
August 2, 2022: Mauritius
In the national Budget on June 7, 2022, it was proposed that the Income Tax Act will be amended to cater for any change that may be required in connection with the introduction of a domestic minimum top-up tax.
The 2022 finance bill (subsequently enacted on August 2, 2022) includes measures to align with the OECD’s BEPS 2.0 recommendations, including a domestic top-up tax for companies part of an international group with a consolidated turnover of €750 million or more.
See: Mauritius 2022 Finance Bill and Pillar Two Top-Up Tax
August 1, 2022: Hong Kong
Hong Kong’s Financial Secretary, Mr Paul Chan, delivered the 2022/23 Budget Speech on 23 February 2022.
Hong Kong’s Advisory Panel on BEPS 2.0 will review the potential impact of the OECD measures on the local economy and report back to the Financial Secretary. A proposal is expected to be submitted to the legislature in the second half of 2022 to implement the global minimum tax rate and other measures in accordance with the OECD BEPS 2.0 framework, targeting multinational enterprises with consolidated group revenue exceeding EUR 750 million. Hong Kong also is considering the introduction of a domestic minimum top-up tax to ensure that the effective tax rate of affected multinationals is at least 15% and, therefore, safeguard Hong Kong’s taxing rights. The top-up tax would apply as from the year of assessment 2024/25.
Hong Kong SAR has announced it will be opting for a QDMTT regime.
In August 2022, the Secretary for Financial Services and the Treasury confirmed that, in line with the delay of the implementation of the GloBE rules in other jurisdictions such as the European Union and the United Kingdom, Hong Kong will also delay the implementation of the IIR from the original OECD timeline of 2023 to 2024 at the earliest.
August 1, 2022: Malaysia
The Ministry of Finance’s 2023 Pre-Budget Statement, states that Malaysia is currently reviewing the technical details of GMT, including the Qualified Domestic Minimum Top-up Tax (QDMTT).
On August 1, 2022, Malaysia opened a public consultation of the Pillar Two GloBE Rules.
See our Article:
Malaysia to Implement Global Minimum Tax & QDMTT in 2024
July 20, 2022: United Kingdom
The UK issued draft legislation for the Pillar Two GloBE Rules on July 20, 2022. See:
https://oecdpillars.com/a-review-of-the-uk-draft-pillar-two-legislation/
May 5, 2022: New Zealand
New Zealand’s tax office launched a consultation into implementing a 15% minimum corporate tax rate.
The consultation, which closed July 1, 2022 asks stakeholders whether or not New Zealand should adopt the global minimum tax rules.
https://taxpolicy.ird.govt.nz/publications/2022/2022-ip-oecd-pillar-two
See our article: New Zealand’s Approach to Pillar Two
May 1, 2022: Nigeria
FIRS issued a press release in May 2022 stating that Nigeria rejects Pillar 1 on the basis it has the potential of wiping out a substantial portion of revenue that would accrue to the country. They accept Pillar Two, but under the inclusive framework rules you either accept both Pillars or you reject both Pillars. Since Nigeria is not able to join one of the pillars, it means they are out of both Pillars.
See our article: The Impact of Nigeria’s Rejection of Both Pillar 1 and 2
April 12, 2022: Jersey
The Government of Jersey has issued a policy paper which aims to:
See:
Jerseys approach to Pillar Two implementation
https://www.gov.je/Government/Consultations/Pages/TwoPillars.aspx
April 7, 2022: Canada
The Department of Finance will begin the process of implementing Pillar Two of the Organization for Economic Cooperation and Development’s deal on global tax reform reached last October, as well as a domestic minimum “top-up tax,” according to a budget plan released by Finance Minister Chrystia Freeland.
The consultation, which runs until July 7, 2022 seeks to ensure that eventual draft legislation takes into account “any necessary adaptations” that must be made to Pillar Two’s model rules to align them to Canada’s legal and income tax context, according to the budget.
March 11, 2022: Bahamas
Prime Minister Philip Davis QC, in his mid-year Budget address, said the Government was awaiting the results of a study by the Deloitte & Touche accounting firm into the Bahamian tax system to determine how it should respond to the 15 percent corporate tax push, including whether the Business Licence fee should be converted to such a regime.
February 18, 2022: Singapore
In Singapore’s 2022 budget, announced by the Minister for Finance on 18 February 2022, it was stated that Singapore is exploring a minimum effective tax rate (METR) that will top-up a multinational enterprise (MNE) group’s effective tax rate in Singapore to 15%.
There will be an industry consultation on the design of the METR.
Singapore has announced it will be opting for a QDMTT regime.
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