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Subject-to-Tax Rule: Global Withholding Tax Map

The Subject-to-Tax Rule is a key component of Pillar Two, and unlike the GloBE Rules focuses on source jurisdictions. It effectively allows source jurisdictions to tax the gross amount of interest, royalties and a defined list of other payments received by a connected company, up to a globally agreed 9% minimum rate. 
 
The Subject-to-Tax Rule applies where covered payments between connected persons are not taxed either in the source country or the residence country at the 9% agreed rate. 
 
This can arise for a number of reasons, eg:
 
  • There is no tax on the income in the residence country and the source country does not levy withholding tax;
 
  • The source jurisdiction levies withholding tax at a rate less than 9% and the income is taxed in the residence jurisdiction at a rate less than 9%;

 

Our interactive global withholding tax map shows the worldwide domestic rates of withholding tax with domestic rates below 9% highlighted in red. 

withholding tax chart
withholding tax chart
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Lee Hadnum

Lee is a qualified Chartered Accountant and Chartered Tax Adviser. A former Senior Tax Analyst at Bloomberg Tax, Lee began his career in Ernst & Young's Entrepreneurial Services department and has 20 years of international tax planning experience. Lee's books have been recommended by The Times, The Guardian and The Telegraph.

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