On 20 December 2021, the OECD released detailed rules to help countries implement the Pillar Two global minimum tax model, to ensure multinational enterprises (MNEs) are subject to a minimum 15% tax rate from 2023.
These rules provide a precise and detailed template to help global governments implement the Global Anti-Base Erosion (GloBE) tax during 2022, ready for enforcement from 2023. The GloBE rules will apply to all MNEs with a revenue over €750 million.
According to the OECD press release, the GloBE rules “provide for a co-ordinated system of taxation intended to ensure large MNE groups pay this minimum level of tax on income arising in each of the jurisdictions in which they operate.”
The rules create a “top-up tax” for profits in any jurisdiction whenever the effective tax rate is below 15%, as well as providing co-ordinated and interlocking rules that:
- Define the MNEs within the scope of the minimum tax;
- Lay out a mechanism for calculating an MNEs effective tax rate per jurisdiction, along with the top-up tax payable;
- Impose the top-up tax on a member of the MNE group in accordance with the agreed rules.
These new Pillar Two model rules also look at acquisitions and disposals of group entities, and include specifics for particular holding structures and tax-neutral regimes. They also cover information filing and provide transitional rules for MNEs subject to the GloBE tax.
As GloBE will come into effect from 2023, we expect implementation announcements from each jurisdiction through 2022, and will keep you updated.
If you have any queries, feel free to contact your Auxadi Tax Team.