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International: OECD releases MLC for Pillar One’s Amount A

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In brief

A text of the Multilateral Convention (MLC) to implement Amount A of Pillar One and additional explanatory guidance has just been released (11 October 2023) by the OECD. This text reflects the consensus achieved so far, but is not yet open to signature and changes could still be made.

Overview

The OECD’s overview on the MLC states that: “The Multilateral Convention to implement Amount A of Pillar One (MLC) is designed to enhance stability and certainty in the international tax system by:

  • Co-ordinating a reallocation of taxing rights (Amount A) for market jurisdictions over a portion of the excess profit (i.e., profit in excess of 10% of revenue) of the largest and most profitable multinational enterprises (MNEs) operating in their market, with a corresponding obligation to relieve double taxation
  • Providing tax certainty to in-scope MNEs, with respect to both Amount A disputes and certain other tax disputes on existing rules
  • Preventing the imposition of digital services taxes (DSTs) and other similar measures on all companies (whether or not they are within scope for Amount A)”

The entry into force of the MLC, once signed, is subject to it being ratified by at least 30 jurisdictions including the headquarter jurisdictions of at least 60% of MNEs currently expected to be within Amount A’s scope.

The following documents have been released together with the MLC:

  • An Explanatory Statement (ES) providing clarification on how each provision is intended to apply. “It reflects the agreed understanding of the negotiators with respect to the MLC and is intended to form part of the context of the MLC as that term is used in customary international law for interpretation purposes”.
  • An Understanding on the Application of Certainty (UAC). It contains further details on how aspects of the Amount A tax certainty framework will operate in practice.

A detailed alert and comments will follow soon.

Key documents released today are linked below.

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Author

Richard Fletcher heads the UK Transfer Pricing Group in London. A seasoned professional with over 30 years of experience as an international tax adviser, he has published a number of articles in various tax technical journals. Richard has presented at the International Tax Review’s Global Transfer Pricing Conference for a number of years and at meetings of tax directors of UK multinationals for the UK branch of the International Fiscal Association.

Author

Imke Gerdes is a partner in Baker McKenzie's New York office, co-chair of the New York and Miami Inclusion and Diversity Committee and a member of the Firm's North America Transfer Pricing Steering Committee. Before joining the New York office, she was a partner in the Firm's Vienna office. Imke is admitted to the German Bar, the New York Bar and she is admitted as tax advisor ("Steuerberater") to the Austrian Chamber for Tax Advisors.

Author

Laura NguyĂȘn-Lapierre practices in the Tax Group of Baker McKenzie in Paris since 2010.

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