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Tax Credit

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Tax Incentives that Don’t Reduce the Pillar Two Effective Tax Rate

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.

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Analysis of R&D Tax Credit Regimes Internationally and their Treatment under Pillar Two

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.

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R&D – practical examples of the treatment of R&D expenditure under the Pillar Two GloBE rules

R&D is a common tax incentive provided by jurisdictions. The question for the purposes of Pillar Two is to what extent it will lead to a reduction in the GloBE effective tax rate, and potentially lead to additional top-up tax.
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.

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