As such the GloBE rules generally favour residence jurisdictions (usually developed countries) as opposed to source jurisdictions (usually developing countries). The subject-to-tax rule is targeted at source jurisdictions, but has a more limited scope (and we are still awaiting the draft model treaty provisions).
As such, very few, if any, African countries will collect top-up tax under an income inclusion rule as most African countries have very few UPEs resident in their country.
As the under-taxed payments rule applies where there is no qualified income inclusion rule (subject to some exceptions) it is also unlikely the under-taxed payments rule will result in significant additional tax for African countries.
However, as a qualified domestic minimum top-up tax (QDMTT) applies before the top-up tax is collected under the income inclusion rule this allows African countries to collect this top-up tax generated by tax incentives in their country rather than allowing the residence jurisdictions to collect the top-up tax through the income inclusion rule.
ATAF Suggested Approach
The report by ATAF includes draft legislation, as well as explanatory notes, for the introduction of a QDMTT for African countries.
Sign into your account to access this analysis
Not a Subscriber?
If you haven’t got a subscription you can join up below.
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.
This website is not affiliated with or related to the OECD. We provide independent insights and analysis on the OECD Two-Pillar Solution