Brussels, 20 December 2021
On the 20th of December 2021, the OECD published detailed rules to assist in the implementation of a landmark reform to the international tax system, which will ensure that Multinational Enterprises (MNEs) will be subject to a minimum 15% tax rate from 2023.
The Pillar Two model rules provide governments a precise template for taking forward the two-pillar solution to address the tax challenges arising from digitalization and globalization of the economy agreed in October 2021 by 137 countries and jurisdictions under the OECD/G20 Inclusive Framework on BEPS.
The rules define the scope and set out the mechanism for the so-called Global Anti-Base Erosion (GloBE) rules under Pillar Two, which will introduce a global minimum corporate tax rate set at 15%. The minimum tax will apply to MNEs with revenues above EUR 750 million and is estimated to generate around USD 150 billion in additional global tax revenues annually.
While the model rules on the implementation of the global tax exclude international shipping income from the scope of BEPS Pillar Two, the definition of shipping income does not include income from inland transport, logistics and freight forwarding.
The GloBE rules provide for a coordinated 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” to be applied on profits in any jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below the minimum 15% rate.
Source: OECD