OECD releases Pillar 2 commentary and examples


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.




Cory Perry

Washington DC, Washington DC

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