Pillar Two – a global minimum tax?
Global tax reform: the OECD pillars
Pillar One – a new taxing right
One of the challenges the OECD two-pillar approach seeks to address is that increasing digitalisation of businesses means profits can be generated in a jurisdiction without any local physical presence. The October framework seeks to address this in relation to the 'largest and most profitable multinationals'.
For those multinational groups that are in scope, a proportion of residual profit (referred to as ‘Amount A’) will be allocated to certain market jurisdictions from which the group derives revenue, regardless of whether the multinational has any physical presence there.
It is expected that Pillar One will be implemented by way of a multilateral convention to be finalised for signing during the course of 2023, for entry into force in 2024.
We can help you understand how these rules would impact your organisation.
Navigating Pillar One
Does your group meet the financial thresholds?
No
NoDoes your group meet the financial thresholds?
Global turnover over EUR 20 billion AND profitability (PBT / revenue) above 10%
Yes
Do any exemptions apply to your group?Yes
YesDo any exemptions apply to your group?
Regulated financial services and extractives are excluded
No
Identify which of your market jurisdictions are in scopeNone
NoneIdentify which of your market jurisdictions are in scope
Market jurisdictions where your group derives at least EUR 1 million (or EUR 250,000 for smaller jurisdictions) of revenue are in scope
No Amount A tax payable
None
How much Amount A tax will you have to pay in those market jurisdictions?
25 per cent residual profit allocated to market jurisdictions subject to safe harbour and adjustments for “Amount B”
What adjustments will there be in your jurisdiction of residence for Amount A tax paid elsewhere?
Elimination of double taxation using the exemption or credit method
What should you be doing now?
If you would like to discuss any of these issues in more detail, please get in touch with your local tax team for more information and access to further relevant content.
