The Organisation for Economic Cooperation and Development (OECD) recently released commentary to accompany the recently published Pillar 2 Model Rules. The commentary elaborates on the application and operation of the global anti-base erosion (GloBE) rules agreed and released in December 2021.
Under the inclusive framework, Pillar 2 intends to impose a 15% minimum tax on the earnings of certain multinational groups with revenues of 750 million euros or more. Applicable multinational groups with income taxes less than 15% would be targeted for additional taxation through the application of two interlocking rules—the income inclusion rule (IIR) and the undertaxed payment rule (UTPR). For additional background on the Model Rules, see our prior story, “Understanding the global implications of Pillar 2 Model Rules.”
Jurisdictions that choose to implement and adopt Pillar 2 can look to the commentary for additional guidance and interpretation of the Model Rules. Within the foreword, the commentary addresses how consistency and coordination of the implementation of such rules will provide for a more inclusive global taxing system to address tax challenges of the digital economy.
The commentary also addresses specific topics in the Model Rules, including:
- Scope exclusions for specific entities and organizations
- Definitions for various terms used throughout the Model Rules
- Clarifying which entity of a multinational group is liable to any top-up tax under the IIR, or UTPR rules, and clarifying how to compute the associated top-up tax
- Providing rules for reorganizations and asset transfers
- Setting forth transitional rules for multinational groups entering into the scope of the GloBE rules
The OECD also released illustrative examples supplementing the Model Rules and the commentary. Additional examples may be published in the future to assist with other aspects of the Model Rules or the commentary.
The OECD additionally issued a public consultation on the final installation of the Pillar Two documents.
The implementation framework—scheduled for release later this year—is intended to support tax authorities in the implementation and administration of the GloBE Rules. Stakeholders should submit comments on the implementation framework by April 11, 2022.
Contacts:
David E. Sites
National Managing Partner, International Tax Services Practice Leader
David leads the firm's International Tax practice, which focuses on global tax planning, cross border merger and acquisition structuring, and working with global organizations in a variety of other international tax areas.
Washington DC, Washington DC
Industries
- Manufacturing
- Technology and telecommunications
- Retail and consumer products
Service Experience
- Tax
- International tax
Cory Perry
Partner, Washington National Tax Office
Washington DC, Washington DC
Industries
- Manufacturing
- Technology and telecommunications
- Private equity
Service Experience
- Tax
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
More tax hot topics
No Results Found. Please search again using different keywords and/or filters.