International Tax
BEPS Two-Pillar Solution: Where Are We Now?
Since initiating the Two-Pillar solution discussions, Pillar Two appears to be progressing toward coming into effect soon, with the EU and about sixteen countries planning to introduce the minimum tax as soon as 2024 and 2025. In contrast, the implementation of Pillar One seems to be paused. Pillar Two: Imminent Implementation Starting in January 2024, the EU and ten countries (Switzerland, United Kingdom, New Zealand, Liechtenstein, Japan, Canada, Australia, South Korea, Vietnam, Norway) are expected to adopt the 15 per cent minimum tax on MNEs with revenues of at least 750 million euros. By January 2025, additional countries such as Singapore, Malaysia, Thailand, Jersey, Guernsey, and Hong Kong, are anticipated to follow. Within the EU, member states have the option to postpone the introduction of the minimum tax for six years if they have no more than twelve MNEs in scope of the Pillar 2 Directive. IIR or QDMTT? Under Pillar Two, countries have the choice to implement either the Income Inclusion Rule (IIR), the Qualified Domestic Minimum Top-Up Tax (QDMTT), or both. The IIR allows revenues from the top-up tax to be collected by the headquarters country. In contrast, the QDMTT assigns these revenues to the host country. Within
BEPS 2.0: Milestones Of Progress In 2023
Pillar 1 Amount A & Digital Services Taxes On 11 October 2023, the OECD released a substantial body of work that reflects two years of negotiation. This included a near final Multilateral Convention to Implement Amount A of Pillar One referred to as the ‘MLC’. It comprises 53 articles of 90 pages, plus nine annexes of 130 pages and an Explanatory Statement of nearly 640 pages. There is also a separate 23-page document explaining several processes for obtaining tax certainty. In addition, there is a new analysis of the financial impacts of Amount A. The release of this package led to the US Treasury Department announcing a consultation process under which comments from the public were requested by 11 December 2023. This process will help to inform the views of the US Administration and Congress on Amount A. Importantly, an agreement on 12 July 2023 provided for the extension into 2024 of a ‘standstill’ of the proliferation of Digital Services Taxes (DSTs) and relevant similar measures on the condition that at least 30 jurisdictions covering at least 60 per cent of the ultimate parent entity jurisdictions of in scope MNEs signed the MLC before 31 December 2023. Given the significant
Decoding Pillar One Amount A: Some Insights And A Q&A With ChatGPT
The OECD released a new report in October 2023 with the aim of providing more clarity to companies around the world on how to implement Pillar One, the international framework proposed by the OECD and signed by 138 countries, for how to allocate profits of companies, particularly digital companies across countries in which they operate. The idea is to create a uniform formula for calculating taxes that can be applied to make the process simple for companies to navigate. The Multilateral Convention is over 200 pages long, and the explanatory text supporting it, is over 600 pages. There are still many issues to resolve before countries sign onto it. The revenue gains from this system as estimated by the OECD Economic Impact Analysis range between $10 to $30 billion, which is a tiny share of global corporate taxes. The US corporate tax revenues, for instance, in 2022 were $425 billion. A fundamental overhaul of the international system with the promise of raising maybe $10 to $20 billion of additional revenues makes one wonder whether the benefits outweigh the costs. In addition, as several people have pointed out, for the United States to ratify this, two-thirds of the Senate would have
International Tax
The International Tax Reform Journey: Past — Present — Future
Increasing globalisation and digitalisation have multiplied opportunities and avenues for cross-border activities, putting pressure on the international tax architecture and creating new demands for collaboration. Further, increasing awareness of development financing needs has led to a collective interest among jurisdictions in coordinating to enhance the capacity of developing economies to mobilise resources to support growth and development. Past The international tax reform journey has already come a long way. Governments have collaborated on international taxation for over 100 years, developing an agreed set of international tax rules that helped promote stability and growth by removing barriers to cross-border investment, while protecting domestic tax bases. However, during the global financial crisis, it became clear that this international tax architecture, developed in the “brick and mortar” economy a century prior, was no longer suited to the increasingly digitalised and globalised world. In parallel, the need became evident to ensure that the voices of countries and jurisdictions across the world shaped the development and implementation of the changes to this architecture. Tax transparency has led the way in responding to these imperatives and remains a stalwart of multilateral efforts to coordinate on tax. In 2009, the G20 declared the end of bank secrecy
Upcoming Power Battle Between UN And OECD: Is CARF The Last Landmark Of An Ending Era?
The advent of digital assets has revolutionised the financial world, offering new opportunities, but also new challenges in regulatory and compliance realms. The Organization for Economic Co-operation and Development (OECD) has stepped up and will expand its Automatic Exchange of Information in Tax Matters (AEoI) to crypto assets with the Crypto Asset Reporting Framework (CARF). This framework marks a significant stride towards integrating the dynamic world of crypto assets into the global financial regulatory landscape. Meanwhile, a power struggle seems to appear on the horizon between the United Nations (UN) and the OECD.
