OECD Model Rules for Implementation 15% Global Minimum Tax Released

The OECD published detailed rules on December 20 to help implement the reform of the international tax system. From 2023, a tax rate of at least 15% will apply to multinationals (MNOs). In October, 137 countries signed an agreement on this.

The rules define the scope and the so-called Global Anti-Base Erosion (GloBE) rules under the second pillar, which will introduce a worldwide minimum corporate tax rate of 15%. The minimum tax applies to MNEs with revenues in excess of €750 million and is estimated to generate approximately USD 150 billion in additional global tax revenues annually.

The GloBE rules provide for a coordinated tax system designed to ensure that large multinational corporations pay this minimum level of tax on income derived from each of the jurisdictions in which they operate. The rules create an “additional tax” to be applied in each jurisdiction to profits when the effective tax rate, determined by jurisdiction, is less than the minimum rate of 15%.

The new Pillar Two model rules will help countries to transpose the GloBE rules into national law by 2022. They provide a system of rules that:

  • define the MNOs within the scope of the minimum load;
  • establish a mechanism for calculating a multinational corporation’s effective tax rate on a jurisdiction basis and for determining the amount of additional tax to be paid under the rules;
  • and impose the top-up tax on a member of the multinational group in accordance with an agreed decision.

The Pillar Two model rules also deal with the treatment of acquisitions and disposals of group members and include specific rules for dealing with certain holding company structures and tax neutrality regimes. Finally, the rules cover administrative aspects, including information submission requirements, and provide transitional rules for MNEs.

At the beginning of 2022, the OECD will publish the commentary on the model rules. Following is an implementation framework addressing administrative, compliance and coordination issues related to Pillar Two.

Source: OECD 20 December 2021

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