The Transitional Qualification Mechanism for IIRs and Domestic Minimum Taxes
On June 17, 2024, the OECD provided more information on the Transitional Qualification Mechanism for determining the qualified status of IIRs and Domestic Minimum Taxes
On June 17, 2024, the OECD provided more information on the Transitional Qualification Mechanism for determining the qualified status of IIRs and Domestic Minimum Taxes
Section 2 of the Fourth Set of OECD Administrative Guidance (issued on June 17, 2024) provides details of the use of GloBE carrying values and the impact that these will have on the GloBE ETR calculation.
Section 1 of the Fourth Set of OECD Administrative Guidance (issued on June 17, 2024) provides further details on the deferred tax liability recapture rule. Read our detailed analysis.
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 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.
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.
Whilst the OECD Model Rules require the application of the IIR to Low-Taxed Constituent Entities outside the jurisdiction, the Commentary permits the application of the IIR domestically (a ‘DIIR’). Both New Zealand and the EU apply a DIIR.
On March 28, 2024, the Decree on the minimum taxation of large groups of undertakings (the ‘GloBE Regulation’) was published in the Official Gazette.
On March 19, 2024, the Swedish Ministry of Finance issued a proposal (including Draft Legislation and Explanatory Notes) to amend its Pillar Two law to include relevant provisions of the OECD Administrative Guidance.
On March 21, 2024, the Australian Treasury issued draft GloBE legislation for consultation. The consultation is open until April 16, 2024.
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