On 3 October 2023, the OECD published the Multilateral Convention to Facilitate the Implementation of Pillar Two’s Subject to Tax Rule (STTR). As a reminder, the STTR is an integral part of the Pillar Two package, which consists of domestic rules (the GloBE rules) and a treaty-based rule, the STTR. One of the key differences compared to the GloBE rules is that the STTR is not limited to MNE groups with a consolidated turnover exceeding the EUR 750 million threshold.
On 17 July 2023, the OECD/G20 Inclusive Framework on BEPS released a package of documents as part of its continuing effort to implement the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy. On Pillar Two, this included further Administrative Guidance (including two new safe harbors) and the GLoBE Information Return, together with a report on the Subject to Tax Rule including a model treaty provision and accompanying commentary. We set out below our experts’ insights on these publications.
July sure is a busy month in the Two Pillar world, with various developments to digest, including today’s final piece of the Pillar Two Administrative Guidance. Here are the links to the relevant July documents. Please watch this space for our detailed alerts being prepared by our experts.
On 2 February 2023, the OECD/G20 Inclusive Framework on BEPS released technical guidance to assist governments in the local implementation of the Global Anti-Base Erosion Model Rules (“GloBE Rules”). This should help governments to correctly apply the GloBE Rules to large Multinational Enterprises from the start of 2024. Moreover, it aims to ensure a coordinated and harmonized implementation of the GloBE Rules. The Administrative Guidance takes the form of a modification to the original version of the Commentary that was issued in March 2022.
Towards the end of last year, the European Union reached an agreement on its Pillar Two Directive, leaving a year for Member States to implement it in domestic law. The OECD also released its guidance regarding safe harbor and Penalty Relief, as well as public consultations on GloBE information Return and Tax Certainty for the GloBE Rules. Please join our experts, including those on tax policy, as well as economists and tax professionals across the globe to discuss the most recent updates and fresh insights on this topic each month. The first session in the series is on 8 February 2023.
Exactly one year after publication of the Pillar 2 Model GloBE Rules on 20 December 2021, the OECD Inclusive Framework on BEPS published an implementation package as part of its ongoing efforts to develop the Pillar 2 Implementation Framework. The Pillar 2 documents released contain (i) guidance on Safe Harbours and Penalty Relief, and (ii) public consultations on the GLoBE Information Return and Tax Certainty for the GloBE Rules.
In a year-end twist, it appears EU Member States formally adopted a directive on a minimum level of taxation for largest corporations, also known as the Pillar 2 Directive.
In a somewhat surprise move, it appears EU Member States have managed to reach preliminary agreement on a minimum level of taxation for largest corporations, also known as the Pillar 2 Directive. The Committee of Permanent Representatives reached the required unanimous support on 12 December 2022. While it is being reported that Poland has reiterated its previous concerns, we do not expect Poland to use its veto this time. With Hungary lifting its veto, this development may mean that the EU will be the frontrunner in implementation of Pillar 2, requiring EU Member States to transpose the Pillar 2 Directive into domestic laws by the end of 2023.
On 25 May 2018, the Council of the European Union adopted a directive on the mandatory disclosure and exchange of cross-border tax arrangements. This is the sixth update of the Directive on Administrative Cooperation, therefore referred to as ‘DAC6’ and the disclosure regime is now live.
Under the new rules, intermediaries such as lawyers, tax advisors, and accountants that design, promote or implement certain ‘arrangements’, or that provide advice in relation to such arrangements, are required to report them to tax authorities.
On 24 October 2022, the Netherlands published an extensive draft proposal, including detailed commentary, for the implementation of the GloBE Model Rules in Dutch tax legislation. The Dutch Pillar 2 Proposal is presented as a stand-alone legislative act referred to as the “Minimum Tax Act 2024”, which would exist separate from the Dutch corporate income tax act. The Minimum Tax Act 2024 is largely based on the EU Pillar 2 Directive that was published on 22 December 2021 and further updated in subsequent months.