Tax incentives for R&D are a common way for a jurisdiction to attract foreign direct investment (FDI).
In this article we look at the financial accounting, domestic tax and Pillar Two treatment of some of the key incentives offered including a deduction, capitalized treatment, a super deduction, tax credits and patent boxes or other similar arrangements.
The Pillar Two GloBE loss election can only be made once per jurisdiction. Therefore it’s essential to identity whether this will be beneficial or not. There may be some cases (such as where there is no deferred tax in a jurisdiction or where corporate income tax rates are very low) that this could swing the balance in favour of making an election. But what about the impact of other timing differences? In this article we look at the pro’s and con’s of making a GloBE loss election, including examples to illustrate key issues.
Latin American countries tend to have relatively high nominal corporate income tax rates, but they can offer significant tax incentives that can push the effective tax rate down substantially.
Qualifying Domestic Minimum Top-Up Taxes (QDMTT’s) are a key part of the top-up tax calculation. Jurisdictions are free to introduce them or not and they are taken into account when calculating jurisdictional top-up tax. In this article we look at why a domestic minimum tax would need to be set at above 15% if it was not a qualifying domestic minimum top-up tax.
The effective tax rate (ETR) under the GloBE rules is compared to the 15% global minimum rate for the purposes of determining whether a jurisdiction is a low-taxed jurisdiction and whether any top-up tax is potentially due.
Therefore, MNE’s will be looking to avoid reducing their ETR where they are either below or just above the 15% global minimum rate.
In this article we look at some of the key tax incentives under the GloBE rules that don’t impact on the GloBE effective tax rate.
This flowchart breaks down all the inclusion inclusion rules into simple steps to allow you to identify which entity in a group is liable for the Pillar Two top-up tax. It includes all the variations of the rules including the specific rules for intermediate parent entities and partially-owned parent entities (POPE’s).
Tax credits under the Pillar Two GloBE rules can be either refundable or non-refundable. A qualifying refundable tax credit is treated as income for Pillar Two purposes as opposed to a reduction in covered taxes. This can have a significant impact on the MNE’s effective tax rate. In this article we provide an analysis of R&D tax credit regimes internationally to determine which are, and which aren’t, qualifying refundable tax credits.
In this article we look at a typical planning scenario for an MNE to maximize tax efficiency under the Pillar Two rules.
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