QDMTT: Legislative Tracker
May 31, 2023
Track the development and application of QDMTTs as they are implemented globally. The OECD Administrative Guidance provides significant flexibility as to their design.
Track the development and application of QDMTTs as they are implemented globally. The OECD Administrative Guidance provides significant flexibility as to their design.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules in Switzerland from January 1, 2024. Updated for the Second Draft Decree of May 24, 2023.
It was reported last week that the Vietnamese Ministry of Planning and Investment is working on designing tax incentives to take account of the upcoming application of Pillar Two.
Last week the Bahamian government released a Green Paper asking for feedback on four proposed strategies for the introduction of corporate income tax in the Bahamas, including a QDMTT.
Yesterday, Switzerland issued an updated Draft Decree for the Pillar Two Global Minimum Tax. This follows the previous Draft Decree that was subject to a public consultation.
Whilst both jurisdictions are opting for direct transposition of the OECD Model Rules, there is a key difference in how they are drafted.
Today, the IASB issued the amendments to IAS 12 to take account of the Pillar Two GloBE Rules.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules in New Zealand.
Yesterday, New Zealand published a draft law (the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Bill) to implement the Pillar Two Global Minimum Tax.
On May 13, 2023, the G7 finance ministers reaffirmed their commitment to both Pillars One and Two.
Whilst the treatment of investment property for financial accounting purposes is important when determining the GloBE treatment, of even more importance are any differences between the financial accounting treatment and the domestic tax treatment.
In most cases, a Qualifying Refundable Tax Credit will result in a higher Pillar Two effective tax rate than a non-qualifying tax credit. However, this is not always the case. We look at some examples in this article.
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.
The Pillar Two GloBE treatment of corporate investments will depend to a large extent on the nature of the activities, the accounting treatment and the ownership interest.
In todays’ Budget speech, the Australian Government confirmed it will introduce an Income Inclusion Rule, Under-Taxed Profits Rule and a Domestic Minimum Tax.
The OECD Administrative Guidance includes a number of specific provisions on the design of a domestic minimum tax to ensure it is a QDMTT. In this article we review the UK’s domestic top-up tax based on the OECD Guidance.
An article by article analysis that sources all of the articles of the Japanese Pillar Two law back to the OECD Model Rules, including notes where there are differences from the provisions in the Model Rules.
A number of jurisdictions have issued legislation (either draft or enacted) to implement the Pillar Two GloBE Rules, however, the approach taken differs significantly. In this article we look at domestic differences not only from the OECD Model Rules, but differences in the implementation of the rules between jurisdictions.
The substance-based income exclusion favours capital intensive and certain low profit margin companies. These companies stand to benefit the most.
An article by article analysis that sources all of the articles of the South Korean Pillar Two law back to the OECD Model Rules, including notes where there are differences from the provisions in the Model Rules.
In this article, we map, on an Article-by-Article basis, the EU Directive to the OECD Model Rules and identify provisions in the EU Directive which have no equivalent in the Model Rules.
The German Federal Ministry of Justice has proposed a Pillar 2 “white list” for countries whose nominal tax rate is sufficiently above the 15% global minimum rate.
In this article we look at the interaction between deferred tax on bonus depreciation and the substance-based income exclusion on investments in tangible assets.
Our table sources all of the Articles in the OECD Model Rules to the relevant provision in the UK draft legislation. It also includes notes where there are differences from the provisions in the Model Rules.
In this article we highlight key differences between the UK approach to Excluded Entities in the draft GloBE legislation and the approach taken in the OECD Model Rules.
The UK proposed some minor technical changes to the domestic implementation of the Pillar Two GloBE rules on April 14, 2023.
Nigeria may be reconsidering its approach to Pillar 2 following an April 2023 workshop jointly organised by the OECD and the Federal Inland Revenue Service (FIRS).
Many jurisdictions will require GloBE registration for administrative purposes, however, the law issued to date has been inconsistent. We outline the GloBE registration obligations from the domestic legislation (enacted and draft) issued to date.
Australia issued an Exposure Draft for Multinational Tax Transparency Reporting last week to provide for global public country-by-country reporting for many large multinational enterprises (MNEs) operating in Australia. This includes the GloBE ETR.
Local reports state that the Ministry of Finance is collecting feedback on its proposals to develop the Global Minimum Tax Law and will submit it to the Government in June 2023. Submission to the National Assembly is planned for its 6th Session in October 2023.
Last week, the IASB released five Staff Papers providing an update to tax accounting under IFRS for Pillar Two. The IASB had previously issued an Exposure Draft for proposed amendments to IAS 12 to take account of the Pillar Two Model Rules.
Track enacted and proposed amendments to global accounting standards relating to the Pillar Two Global Minimum Tax.
Yesterday, the UK Financial Reporting Council (FRC) issued Financial Reporting Exposure Draft (FRED) 83 on draft amendments to FRS 102 for Pillar 2 tax accounting.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules in Ireland from 2024.
The Ministry of Taxation and the Ministry of Industry, Business and Financial Affairs have sent a questionnaire to Danish MNEs expected to be within the scope of the Pillar Two GloBE Rules.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules in Liechtenstein from 2024.
On March 31, 2023, the Irish government issued a Feedback Statement on the Pillar Two Global Minimum Tax. This included draft legislation.
Today, the Accounting Standards Board of Japan (ASBJ) issued the Practical Response Report on the ‘Treatment of Deferred Tax in Relation to the Revision of the Corporation Tax Act Corresponding to Global Minimum Taxation’.
The Practical Response Report is applicable from today and until it is repealed by the ASBJ.
It’s been reported that Kenya is to sign up to the Two Pillar Solution. It was not a signatory to the original October 2021 Statement as it was not prepared to remove its digital service tax as required for Pillar One.
The “Act for the Partial Revision of the Income Tax Act” was promulgated in Special Issue No. 25 of the Official Gazette on Friday, March 31, as Act No. 3/2023.
On March 29, 2023, Liechtenstein published draft legislation for the implementation of the Pillar Two Globe Rules.
In yesterday’s 2023 Canadian Budget, the government confirmed that it will introduce legislation implementing the Income Inclusion Rule (IIR) and a domestic minimum top-up tax (QDMTT) applicable to Canadian entities of MNEs with effect for fiscal years of MNEs that begin on or after December 31, 2023.
On March 28, 2023, Japan enacted the second domestic law to give effect to the Pillar Two GloBE rules from April 1, 2024.
The wording for Pillar 2 implementation can vary from ‘ On or after December 31, 2023’, ‘From December 31, 2023’ or ‘After December 30, 2023’ to ‘From January 1, 2024’ or ‘From April 1, 2024’. We look at why.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules in the United Kingdom for accounting periods beginning on or after 31 December 2023, as provided in the 2023 Spring Finance Bill.
In this article we look at the impact of Pillar Two on tax stabilization agreements, and the benefits of renegotiating agreements.
The Spring Finance Bill 2023 (Finance (No. 2) Bill) was published yesterday (March 23, 2023). The Bill includes provisions to implement key aspects of the Pillar Two Global Minimum Tax for accounting periods beginning on or after 31 December 2023.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules in Germany from 2024.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules in Japan from April 1, 2024.
On March 20, 2023, the German Federal Ministry of Finance published a consultation, including a draft law (the Minimum Taxation Directive Implementation Act) to implement the EU Global Minimum Tax Directive. The consultation is open for comments until April 21, 2023.
Many of the deferred tax data points are not stand-alone data sources but arise as a result of further calculations that are themselves based on underlying data-sources. There is therefore a ‘layering-up’ of data before the GloBE calculations can be effectively made.
In the 2023 Budget on March 14, 2023, the Prime Minister of Barbados confirmed that the Barbados Revenue Authority has already started consultations with impacted entities with a view to implementation of the GloBE rules.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules in Sweden from January 1, 2024.
In today’s 2023 Spring Budget, the UK government confirmed that it will include the Pillar Two Global Minimum Tax in the Spring Finance Bill 2023.
Last week, the Vietnamese Government released Resolution 31/NQ-CP of the February 2023, Regular Government Session to speed-up Global Minimum Tax implementation.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules in the Netherlands from January 1, 2024.
Analysis of the domestic implementation of the Pillar Two Global Minimum Tax rules in South Korea from January 1, 2024.
Top-up taxes under a QDMTT are added to covered taxes of a CFC but only for the purposes of calculating the allocation of Blended CFC Taxes. The way the rules operate is aimed at minimising unrelievable CFC taxes under Blended CFC Regimes. Read more.
Hungary’s Prime Minister Viktor Orbán reiterated that Hungary has an Official letter from the EU agreeing to the Local Business Tax being a covered tax for the purposes of the Pillar Two Global Minimum Tax.
On March 6, 2023, Spain’s Ministry of Finance and Public Function opened a public consultation on the transposition into Spanish law of the European Directive on the Global Minimum Tax
The clarifications and additions to the Commentary to the Pillar Two GloBE Rules provided by the OECDs Administrative and Safe Harbours Guidance, means that there are now up to four jurisdictional effective tax rates (ETRs) that may need to be calculated to determine the impact of the GloBE Rules.
Yesterday, the Thai Cabinet approved the proposal to implement a Global Minimum Tax (see item 48 of the following Cabinet Resolution:
Yesterday, the Director of the OECD’s Centre for Tax Policy and Administration, stated to Brazil’s Finance Minister that the implementation of the 15% global minimum tax on multinational companies should be part of tax reform in Brazil.
Whilst the British Virgin Islands (BVI) and the Bahamas do not levy corporate income tax, the Director of the BVI International Tax Authority, has confirmed that the BVI is to take a different approach to the Bahamas in relation to the Pillar 2 Global Minimum Tax.
On March 2, 2023, the Belgian Minister of Finance announced the first phase of a broad tax reform that will include the Pillar Two global minimum tax.
Whilst China was a signatory to the October 2021 Statement on a Two-Pillar Solution, domestic implementation has been slow. On February 17, 2023, a consultation issued by the Chinese Ministry of Finance ended.
The Transitional CbCR Safe Harbour is a short-term measure that will allow an MNE to avoid undertaking detailed GloBE calculations for a jurisdiction if certain requirements are met. Data will need to be extracted from the CbC Report, financial statements and ERP and EPM systems. Group structure information will also be required.
Yesterday, the Chairman of the Vietnamese National Assembly confirmed that the Vietnamese government is progressing in its proposals for the implementation of the Pillar Two Global Minimum Tax
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 Attorney General of the Bahamas, has stated that the government is planning to introduce a Pillar Two Global Minimum Tax.
Malaysia issued its 2023 revised Budget today (4pm Malay time). The original October 2023 Budget included a commitment to introduce the Pillar Two GloBE Rules and a Qualified Domestic Minimum Top-Up Tax. This was reaffirmed in the revised Budget.
In yesterdays 2023 Budget, the South African Treasury confirmed that during the 2023 legislative cycle, the government will publish a draft position on the implementation of the Pillar Two global minimum tax for public comment and draft legislation will be prepared for inclusion in the 2024 Taxation Laws Amendment Bill.
On February 7, 2023, the Special Investigator submitted the Interim Report on the proposal for the implementation of the EU Global Minimum Tax Directive to the government. Read our analysis.
In February, 2023, the Special Investigator submitted the interim report on the proposal for the implementation of the Global Minimum Tax Directive to the government. We have an English translation of the interim report (running to over 400 page) available to all site members.
In Today’s 2023 Budget, Hong Kong’s Financial Secretary confirmed that Hong Kong will implement the Pillar Two Global Minimum Tax from 2025.
The GloBE rules include a number of insurance specific adjustments. In this article we look at the nature of these provisions as well as the impact of the GloBE rules on insurance companies generally. Updated for OECD Administrative Guidance.
In Bermuda’s 2023 Budget last week, the government announced it is actively looking at how to implement the Pillar Two global minimum tax.
Paraguay stands out amongst most South American countries as being the one most at risk of substantial jurisdictional top-up tax for in-scope groups under Pillar Two.
The Director of International Taxation of the Directorate General of Taxes has confirmed Indonesia is planning to implement the Pillar Two GloBE Rules from 2024. This is unlike Singapore which has delayed the implementation until 2025.
The global implementation of the GloBE rules is staggered with different jurisdictions applying both the Income Inclusion Rule (IIR) and the Under-Taxed Payments Rule (UTPR) from different dates.
In the 2023 Budget Speech, the Singapore government announced it is to implement Pillar Two from 2025.
Under Article 4.3.2(c) of the OECD Model Rules, tax paid under a CFC regime is generally allocated for GloBE purposes to the CFC entity. However, Article 5.1.3 of the OECD Administrative Guidance confirms that this is not the case for Qualified Domestic Minimum Top-Up Taxes (QDMTTs).
The Pillar Two Navigator – GloBE Adjustments chapter has been updated for the OECD Administrative Guidance.
The OECD Administrative Guidance included a number of new elections available to MNEs to simplify or minimise some of the adverse impacts of the GloBE Rules. We have updated our Pillar Two Elections product to include all GloBE Elections.
Article 2.9 of the OECD Administrative Guidance provides for an Equity Investment Inclusion Election. This relates, in part, to the interaction of Articles 3.2.1(c) and 4.1.3(a) of the OECD Model Rules.
As an alternative to incurring additional top-up tax when a domestic tax loss exceeds the GloBE loss, Article 2.7 of the OECD Administrative Guidance provides that an MNE can elect for the Excess Negative Tax Expense administrative procedure.
Article 2.8 of the OECD Administrative Guidance provides for the inclusion of deferred tax in the GloBE deferred tax adjustment amount for ‘Substitute Loss Carry Forwards’.
On February 3 and 6, 2023, the Ministry of Finance published the “Bill for Partial Revision of the Income Tax Act” This includes the proposed implementation of the Pillar Two GloBE rules from April 2024.
Qatar is the first Arab state to introduce a 15% minimum tax in Law 11 of 2022, issued on February 2, 2023.
The OECD Administrative Guidance provides details on which aspects of the GloBE Rules need to be reflected in the QDMTT regime and which aspects don’t.
Article 2.10 of the Administrative Guidance provides more information on the treatment of the US Global Intangible Low-Taxed Income (GILTI) regime.
Today the OECD has issued the Agreed Administrative Guidance for the Pillar Two GloBE Rules. This is the final part of the implementation framework for the GloBE Rules.
Yesterday the Financial Accounting Standards Board (FASB) issued a Tentative Decision on the treatment under US GAAP of deferred taxes for the GloBE minimum tax.
See our infographic for the impact of the proposed IASB Pillar 2 amendments to IAS 12 for MNEs with a December 31 year end.
Calculate estimated GloBE top-up tax. Add unlimited companies and jurisdictions via an easy to use control panel to view potential jurisdictional liabilities.
Foreign tax credits interact with the Pillar Two GloBE Rules in a number of ways. In this article we assess the key impact.
Our Modelling Tool takes the underlying source data from the OECD aggregated CbC source data and subjects it to a data manipulation process to provide a drill down into some of the key metrics and data sources that are relevant for Pillar Two on a jurisdictional basis.
Use our members Income Inclusion Rule Calculator to see how the IIR applies. Enter details of the low-taxed entity including jurisdictional GloBE income and other relevant information to determine top-up tax payable by the parent company.
Following the approval of the EU Global Minimum Tax Directive, Taiwan’s Ministry of Finance has stated it will prepare draft legislation for the government to increase Taiwan’s domestic minimum tax rate from 12% to 15%.
However, this creates a number of issues in terms of its interaction with the Pillar Two global minimum tax.
Liechtenstein has announced it is to issue a consultation on a Pillar Two Global Minimum Tax in March 2023.
In this article we take a comprehensive look at how the substance-based income exclusion applies including the various adjustments for permanent establishments and flow-through entities and the data points required.
Our Global Digital Services Tax Tracker has been updated to January 23, 2023.
In this article, we look at the potential impact of the Pillar Two GloBE Rules for MNEs operating in the Philippines.
On December 20, 2022, Indonesia issued Government Regulation No. 55/2022 on the Adjustment of Regulations in the Field of Income Tax. This included reference to the implementation of a global minimum tax in Indonesia as well a a desire to implement Pillar One.
Today’s OECD webinar on Tax challenges of digitalisation: Economic impact assessment of the Two-Pillar Solution reported that revenue gains from both Pillar One and Pillar Two is expected to increase from the previous economic impact assessment.
Just because the statutory rate of corporate income tax is significantly below 15% does not necessarily mean that top-up tax would apply under the Pillar Two global minimum tax rules. We look at why in this article.
With the enactment of the Pillar Two GloBE Rules in South Korea from January 1, 2024, the costs of an unintentional permanent establishment (PE) in South Korea may be significantly greater.
Our members-only modelling tool carries out the calculations based on the required inputted information to determine whether the Transitional CbCR Safe Harbour applies.
The GloBE Information Return will require information on an MNEs corporate structure in so far as it impacts the application of the Pillar Two GloBE rules. In this article we look at the data points that are required to comply with this.
As a members only resource, we include an unofficial English translation of the South Korean Global Minimum Tax Law (Law 19191 of December 31, 2022).
Today, the International Accounting Standards Board (IASB) issued an Exposure Draft for proposed amendments to IAS 12 to take account of the Pillar Two Model Rules.
On December 31, 2022 the first domestic law was enacted to give effect to the Pillar Two GloBE rules from January 1, 2024. Read more.
In this first of a series of articles that will break down all of the data points for the purposes of the Pillar Two GloBE rules (and in particular the expected reporting in the GloBE information return), we look at the UPE data points in the corporate structure.
The International Accounting Standards Board (IASB) has stated it expects to publish its Exposure Draft on the Pillar Two Model Rules on January 9, 2023. Read more.
The African Tax Administration Forum (ATAF) has released a Suggested Approach to Drafting Domestic Minimum Top-Up Tax Legislation under the Pillar Two GloBE Rules.
We can expect to see a substantial number of countries releasing and enacting legislation to implement Pillar Two in 2023.
On December 16, 2022, the ruling coalition issued the draft tax reform outline for 2023. This indicates that draft legislation to incorporate an income inclusion rule based on the OECD Model Rules will be put forward in 2023.
On December 21, 2022, the Congressional Research Service updated its policy document: The Pillar 2 Global Minimum Tax: Implications for U.S. Tax Policy following the EU adoption of the Global Minimum Tax Directive.
On December 20, 2022, the OECD published a consultation document on the Pillar Two GloBE Information Return which includes 268 data points for MNEs to collect.
On December 20, 2022, the OECD published a consultation document on Tax Certainty for the GloBE Rules. We look at the key highlights.
On December 20, 2022, the OECD opened a consultation on the draft Multilateral Convention provisions for the removal of Digital Services Taxes and other similar measures under Pillar One.
Today the OECD announced details of two safe harbours and a penalty relief provision for the Pillar Two GloBE rules.
The Irish Finance Bill 2022 was published in October 2022 and includes some key changes to the corporation tax system to take account of the Pillar 2 rules.
December 16, 2022 saw more developments on the international implementation of Pillar Two. The Swiss parliament approved the draft constitutional amendment for enacting the GloBE rules and Azerbaijan joins the 2-Pillar solution.
Last night the Council of the European Union formally adopted (among other things) the EU Pillar Two directive as Poland pulled its veto at the last minute.
Following the recent preliminary agreement reached in the EU Council on the implementation of Pillar Two, Poland had asked for further time to consider the implementation of the EU Directive.
On 9 December 2022, the UAE issued the Federal Decree-Law No. (47) of 2022 on the taxation of corporations and businesses. In this article we look at the new UAE CT Law from a Pillar Two perspective.
The EU Council has reached agreement on the implementation of Pillar Two. As Pillar Two gains momentum the critical mass of countries required for effective implementation gets closer.
The OECD published a consultation document on Amount B of Pillar One today. We take an initial look at the key aspects of the Amount B consultation.
In this article, we take a look at Thailand’s tax regime from a Pillar Two perspective, with a particular focus on their tax incentives.
There are features of the NZ regime that raise issues from a Pillar Two perspective. Some of these were addressed in a Pillar Two consultation document issued earlier this year. In this article we look at some of the key issues in the implementation of Pillar Two for New Zealand.
Article 4.3.2(c) of the OECD Model Rules allocates tax paid on CFC income to the CFC entity (subject to a pushdown limitation). However, this leads to a situation where an MNE can reduce potential top-up tax by allocating more income to a CFC entity.
Pension funds are subject to a number of specific provisions under the Pillar Two rules. In this article we look at some of the key aspects of Pillar Two that impact on Pension Funds.
Our Global VAT on Digital Services Tracker has been updated and now covers over 80 jurisdictions.
Whilst a number of the measures follow the proposals in the November Staff Paper, the prospect of certain other additional disclosures not previously suggested, has been put forward. In this article we review the IASB’s announcement and proposed changes.
Insurance Investment Entities are subject to special treatment under the Pillar Two GloBE Rules. Read our analysis of the key provisions.
Luxembourg is home to the second largest funds industry in the world and the largest in Europe. In this article we look at the Pillar 2 impact on Luxembourg private debt funds.
Use our Global map to determine the effective tax rate for R&D expenditure globally. Including the average R&D ETR per jurisdiction and the impact of incentives.
Following draft legislation issued in July 2022, the UK government confirmed in this week’s Autumn Statement that they will legislate to implement Pillar Two from 2024 including the UTPR and a QDMTT.
The OECD issued the Fourth Edition of its Corporate Tax Statistics report yesterday. The Press Release that accompanied the report stated that the report supported the need to press forward with the OECD Two-Pillar Solution to address base erosion issues. In this article we look at some of the key insights and highlights from the report.
In this article we take a detailed look at Taiwan’s tax regime from a Pillar Two perspective. Key aspects covered include tax incentives provided by the Statute for the Establishment and Management of Free Trade Zones, the Statute for Industrial Innovation and the provisions of the Income Tax Act.
In this article we look at some of the most significant issues to consider including the determination of when and how deals can bring groups within the scope of Pillar Two, specific considerations for private equity funds, differences in GloBE and domestic tax treatment and potential restrictions on post-acquisition transfers.
The International Accounting Standards Board (IASB) will be discussing the approach to Pillar Two in its November 22, 2022 meeting. As preparation for this, a staff paper has been issued to outline a proposed approach to Pillar Two including a temporary exception and disclosure requirements.
MNEs within the scope of Pillar 2 are well advised to carry out a Pillar 2 Impact Assessment. In this article we look at the approach to a Pillar 2 impact assessment.
In this article we review Oman’s income tax laws from a Pillar Two perspective to highlight key issues to consider for MNEs with Omani subsidiaries or permanent establishments.
Undertaking an early Pillar Two Impact Assessment allows MNE groups to identify potential top-up tax, ascertain and implement changes to processes and systems and provides time to consider restructuring to efficiently plan for Pillar Two.
The Pillar Two Rules include specific provisions for tax transparent entities to avoid artificially low effective tax rates and significant top-up tax, particularly for tax transparent UPEs.
In this 35-page report we take a systems-based approach to the GloBE rules and look at effective systems implementation to allow the Pillar Two GloBE ETR calculations to be undertaken.
In this article we look at why the correct determination of which tax credits are classed as Qualified Refundable Tax Credits is so important and the significant risks to the application of the Pillar Two rules they potentially pose if there is a non-harmonized approach.
The specific treatment of dividends and other distributions under the Pillar Two GloBE Rules raises some interesting issues and opportunities in blending such payments between otherwise low-taxed entities and holding companies to reduce any potential top-up tax liability.
Israel’s incentive regime offers significant tax incentives. In this article we assess the impact this may have on MNEs post Pillar Two.
In this article, we look at Singapore’s tax system and some of the key drivers of low ETRs for Pillar 2, including other factors that can temper any reduction.
On October 24, 2022, the Dutch Government released a consultation, including draft legislation, on the Pillar Two GloBE rules. See the key takeaways.
In this analysis we look at the key corporate tax incentives and assess their potential FDI impact taking into account the Pillar Two GloBE Rules.
Jurisdictions that apply a territorial basis do not tax foreign source income. This raises some interesting issues in the application of the Pillar 2 rules.
The nature of the Pillar Two GloBE Rules means that in some cases, SPVs can lead to top-up tax that would not occur if a subsidiary was directly held.
In this analysis we look at the key features of China’s tax law that would need to be taken into account by MNEs with Chinese subsidiaries for Pillar 2 purposes.
In a post Pillar Two environment, the nature of tax incentives needs to be carefully considered to ensure that both MNEs and tax authorities derive benefits. In this analysis we model the impact of payroll tax incentives.
In this article we look at India’s corporate income tax regime and assess the impact of the Pillar Two GloBE Rules on MNE’s with operations in India.
Vietnam’s broad income-based tax incentives could impact on investment into Vietnam in a post Pillar Two environment. We look at the issues and policy options.
On October 6, 2022, the OECD issued the Progress Report on the Administration and Tax Certainty Aspects of Amount A of Pillar One (the ‘Progress Report’), which includes draft Model Rules on the administration of Amount A.
In this members article we look at key developments last week, including Ireland, Vietnam, Belgium and the OECD.
In today’s 2023 Budget Speech, the Malaysian government joined the growing number of countries that will implement the 15% global minimum tax under Pillar 2.
The OECD issued a report yesterday on tax incentives after Pillar 2. We look at the key takeaways including which tax incentives have the largest impact.
Centralized HR/payroll companies are frequently used by MNE groups but raise specific issues in relation to the Pillar Two GloBE Rules. In particular, the impact of using a centralized function and the nature of recharges could have an impact on the substance-based income exclusion of group entities.
On October 4, 2022, Australia issued a consultation paper on Pillar Two of the OECD Two-Pillar Solution. We look at the key aspects of the consultation.
Nigeria has rejected Pillar 1 and 2 on the basis that the thresholds would result in a loss of tax revenue. We look at the changes to domestic law to tax MNEs.
The Subject-to-Tax Rule is a key element of Pillar Two, and allows source jurisdictions to levy additional tax on certain payments. Read what you need to know.
MNE groups should pay careful attention to any group financing companies in light of the Pillar Two Rules. In this analysis we look at the impact of Pillar Two.
In this article we look at some of the key drivers that can result in Pillar 2 ETR’s being significantly different to the headline domestic tax rate.
The Netherlands has issued Parliamentary Paper 22112 (3278) in which it provides comments on the EU’s proposed directive for the implementation of Pillar Two.
The requirements for a participation exemption under domestic law may not match the exemption requirements in the Pillar Two Rules. Read our 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.
IAS 1, IAS 10 and IAS 12 all have provisions that can impact on the required disclosures in financial statements for Pillar Two, however, the key determinant will be whether the domestic tax law to implement the Pillar Two GloBE Rules has been announced, substantively enacted, or enacted before the financial statements are issued.
It’s been reported that Barbados is to ask the OECD for more time to implement the Pillar Two GloBE Rules. Exactly what Barbados expects is still unclear.
Germany, France, Italy, Spain and the Netherlands issued a joint statement stating that if agreement is not reached on Pillar Two in ‘the next few weeks’ they will push forward domestic implementation of the Pillar Two GloBE rules ‘by any possible legal means’ in 2023.
Identifying the data points required to apply the Pillar 2 rules is the first step in any tax data mapping MNEs undertake. We list the key 122 data points.
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.
Item 17 of the third relief package (issued September 4, 2022) states that Germany will start implementing Pillar 2. Read our initial thoughts on its enactment.
Whilst Pillar 1 and Pillar 2 are separate and independent of each other, there are areas where they overlap, most notably the inclusion of Pillar 1 tax for Pillar 2 purposes and the overlap in some of the adjusted profits definitions.
A number of the adjustments to the deferred tax expense under Pillar 2 will mean significant changes to ERP systems. See our list of all required adjustments.
The Amount A elimination of double taxation provisions in Title 5 of the Progress Report on Amount A of Pillar One apply to prevent a multinational group being taxed twice on profits allocated to a market jurisdiction where there is already some form or physical establishment that is subject to tax.
On July 22, 2022, South Korea released a draft law to implement the OECD’s Pillar Two GloBE Rules (the ‘draft law’) in legislative notice 2022-128. Read our analysis.
On August 17, 2022, the Swiss Federal Council issued a draft decree for the implementation of Pillar Two of the OECDs Two Pillar Solution from January 1, 2024. Read our detailed analysis.
The Revenue Sourcing Rules for Amount A are used to determine where an in-scope multinational group derives its revenues. This is then used in the profit reallocation calculation.
Use our interactive tool to quickly determine the relevant sourcing rule for each revenue type.
The Amount A reliable indicators are the practical methods of allocating revenue to jurisdictions for the purposes of the Pillar One, Amount A revenue sourcing rules.
Allocation Keys are a key aspect of the Amount A Revenue Sourcing Rules, which attribute revenue to the jurisdictions an MNE group operates in. This is then used when determining how much profit is reallocated to a jurisdiction.
The marketing and distribution profits safe harbour is included in Articles 6(3)-(6) of the Progress Report on Amount A of Pillar One. It is deducted
A key issue with a distribution tax regime such as Estonia’s is that a company may not distribute profits for a number of years. They would have GloBE income but no or limited tax suffered on that income which would lead to a sizeable Pillar Two top-up tax liability. As such a distribution tax regime election is available.
Our GloBE Loss Election interactive tool allows you simulate the impact on your top-up tax liability depending on whether a GloBE Loss Election is made or not.
The Chief Executive of Malaysia’s Inland Revenue Board has confirmed that Malaysia intends to push ahead with the implementation of Pillar Two.
Our Qualified Domestic Minimum Top-Up Tax (QDMTT) interactive tool allows you simulate the impact on your top-up tax liability depending on whether the domestic top-up tax is a QDMTT or is non-qualifying.
Mauritius 2022 Finance Act includes Pillar Two Top-Up Tax The Finance (Miscellaneous Provisions) Bill 2022 (subsequently enacted with very minor amendments in the Finance (Miscellaneous Provisions)
The Total Deferred Tax Adjustment Amount is a key element of the Pillar Two effective tax rate calculation. See our members flowchart which guides you though the calculation.
Differences in Accounting Standards have a significant impact on the Pillar Two effective tax rate (ETR) and top-up tax calculation. Read this detailed report.
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.
The Pillar Two rules include a number of transitional rules that apply to MNEs from December 1, 2021. In this members article we look at the adjustments and tracking impact for MNE groups.
The UK published draft legislation on July 20, 2022, to implement a ‘multinational top-up tax’ in line with Pillar Two of the OECDs Two-Pillar Solution. We have produced a calculator to illustrate the key aspects to the calculation of the multinational top-up tax.
The UK published draft legislation on July 20, 2022 to implement Pillar Two from December 31, 2023. Whilst similar to the OECD Model Rules there are differences, not least the treatment of capital gain carry-backs.
The Pillar Two effective tax rate (ETR) calculation for investment entities is similar to the standard ETR calculation, however, there is an important twist in that the top-up tax is adjusted for minority interests. There is no adjustment for minority interests under the standard ETR calculation. In this article we look at the impact of this.
Permanent Establishments (PEs) are subject to a number of specific rules under Pillar Two in order to apply the general provisions to them. Key issues are what is a PE under Pillar Two? where is it located? and how are income and taxes allocated to it?
This Pillar Two under-taxed payments rule (UTPR) calculator gives an indication of the broad operation of how the top-up tax is allocated to UTPR jurisdictions.
The Pillar Two rules don’t just apply to companies. They apply to ‘entities’ which can include Trusts and Foundations. The application of the Pillar Two rules to Trusts and Foundations can give rise to a number of issues. Read our member article on some of the practical issues to consider.
The Pillar Two Rules generally require transactions between entities located in different jurisdictions to be priced at an arms-length basis. However, special rules apply to unilateral transfer pricing adjustments given the risk of income either being taxed twice or not taxed at all.
Deferred Tax has a significant impact on the Pillar Two effective tax rate (ETR) and therefore on any top-up tax that may be levied. Use our Pillar Two Deferred Tax Liability Calculator to model the impact on the Pillar Two top-up tax.
Although Pillar One and Pillar Two are largely separate, the draft Pillar One rules issued by the OECD on July 11, 2022 include some interesting overlaps with Pillar Two. Read our analysis of how Pillar One ties into Pillar Two.
On July 11, 2022, the OECD released a progress report on its Two Pillar Solution. This included draft rules on Pillar One. Whilst these draft rules are subject to a consultation, they nevertheless make interesting reading, particularly as there has, to date, been very little detailed information on the marketing and distribution profits safe harbour. Use our Pillar One profit allocation calculator to see the impact of the profit reallocation and marketing and distribution profits safe harbour.
This is according to an OECD progress report issued yesterday which states that “…implementation of the global minimum corporate tax seems ineluctable.” Whilst mainly focusing on Pillar One of the Two-Pillar framework, the report does provide a useful update on the status of Pillar Two’s global implementation and the OECDs opinion on how its progressing.
There’s been a lot of speculation as to whether the US in particular will be able to enact legislation to implement Pillar Two in the near future. This then raises the question as to exactly what would happen?
The answer depends on whether the ‘tipping point’ has been reached. The Pillar Two rules depend on a certain critical mass of jurisdictions implementing Pillar Two. Once this point is reached there would be significant disadvantages to not implementing Pillar Two.
Our capital gains carry back tool models the impact of making a Pillar Two election to spread capital gains. View different scenarios by changing gains and losses.
The substance-based income exclusion is one of the key carve-outs in the GloBE income calculation. It provides a measure of relief from the Pillar Two
The Jersey government issued a tax policy paper on the implementation of Pillar Two. In this members-only article, we look at the options discussed and the impact on MNE groups with holding companies and subsidiaries in Jersey.
Deferred Tax is a key element of the Pillar Two Rules, aimed at smoothing out the effective tax rate to address timing differences. This simple Pillar Two deferred tax calculator shows the broad operation of a deferred tax asset and its impact on the effective tax rate and top-up tax.
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.
The UK is set to publish draft legislation to implement Pillar Two of the OECDs Two-Pillar Solution in July 2022. In this post we consider the key outstanding matters relating to the UK’s implementation of Pillar Two, including: Application to Small Groups, The Undertaxed Profits Rule, Reporting and Payment, Joint and Several Liability, CbC Simplification and a Domestic Minimum Tax.
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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