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.
Contents
General
The Spring Finance Bill 2023 (Finance (No. 2) Bill) was published yesterday (March 23, 2023), along with its Explanatory Notes. 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.
This follows the original draft legislation published on July 20, 2022.
The Undertaxed Profits/Payments Rule was not included in the Bill, however this is not unexpected as it was announced in the Autumn Statement that this will apply no earlier than accounting periods beginning on or after 31 December 2024.
The draft legislation is very comprehensive and, as expected, covers relevant aspects of the OECD Model Rules, Commentary and other Published Guidance.
In particular it, provides for an Income Inclusion Rule (named the Multinational Top-Up Tax) and a Domestic Top-Up Tax (which is likely to be a Qualified Domestic Minimum Top-Up Tax).
The UK Bill is the most comprehensive law we have seen to date to implement the Pillar Two Global Minimum Tax. It closely follows the OECD Model Rules and reflects the latest guidance, including aspects of the OECD Safe Harbours Guidance and the Administrative Guidance.
It is worth noting at the outset that Section 255 of the Bill specifically refers to the OECD Model GloBE Rules and Commentary (including the OECD Examples) and directly applies them in various aspects of the application of the Multinational Top-Up Tax.
In addition, it applies ‘any further commentaries or guidance published from time to time by the OECD that are relevant to the implementation of the Pillar Two model rules’.
This would, therefore, include the OECD Administrative Guidance that will itself be included in an updated version of the OECD Commentary.
Application
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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.
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