On February 2, 2023 the OECD released technical guidance to assist governments with implementation of the landmark reform to the international tax system, which will ensure multinational enterprises (MNEs) will be subject to a 15% effective minimum tax rate.
The Agreed Administrative Guidance for the Pillar Two GloBE Rules will ensure co-ordinated outcomes and greater certainty for businesses as they move to apply the global minimum corporate tax rules from the beginning of 2024. Together with the December 2022 publication of the Safe Harbours and Penalty Relief document and public consultations on the GloBE Information Return and Tax Certainty, today's release finalises the Implementation Framework as set out in the October 2021 Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy.
The Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two) as issued today includes guidance on the recognition of the United States' minimum tax (known as the Global Intangible Low-Taxed Income or "GILTI") under the GloBE Rules and on the design of Qualified Domestic Minimum Top-up Taxes. It also includes more general guidance on the scope, operation and transitional elements of the GloBE Rules to allow Inclusive Framework members that are in the process of implementing the rules to reflect this guidance in their domestic legislation in a co-ordinated manner. The guidance responds to stakeholder feedback on technical issues, such as the collection of top up tax in a jurisdiction in a period where the jurisdiction has no GloBE income, and the treatment of debt releases and certain tax credit equity structures.
The guidance that was released today represents the final piece of work on the GloBE Rules that the Inclusive Framework members had committed to deliver as part of the implementation framework. The items of Administrative Guidance set out in the document released on February 2, 2023 address a wide range of issues that Inclusive Framework members have identified as the issues most in need of immediate clarification and simplification for stakeholders. The Administrative Guidance will be incorporated into a revised version of the Commentary that will be released later this year (and replaces the original version of the Commentary issued in March 2022). The examples included in the Administrative Guidance will be incorporated into a revised set of detailed examples that will be released alongside the revised Commentary. The Inclusive Framework will continue to consider Administrative Guidance priorities on an ongoing basis, where more clarity is required, with the aim of releasing guidance throughout the year as soon as it is agreed so that the Inclusive Framework members can meet their implementation schedule.
Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two) as released by the OECD on February 2, 2023 can be found here.
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