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OECD Releases Commentary On Pillar Two Model Rules
Monday 14th March 2022
The OECD has released its commentary on the Pillar Two Model Rules which were published in December 2021.
Pillar Two Model Rules define the scope and set out the mechanism for the so-called Global Anti-Base Erosion (GloBE) rules under Pillar Two. These introduce a global minimum corporate tax rate set at 15%. The minimum tax rate will apply to MNEs with revenue above €750m effective from 2023. It is estimated this will generate around US$150bn in additional global tax revenues annually. The new rules will assist countries to bring the GloBE rules into domestic legislation in 2022.
The rules address the treatment of acquisitions and disposals of group members and include specific rules to deal with particular holding structures and tax neutrality regimes. In addition, they address administrative aspects, including information filing requirements, and provide for transitional rules for MNEs that become subject to the global minimum tax.
OECD’s Commentary comprises sections on scope, charging provisions, GloBE income/loss computation, computations of adjusted covered taxes, effective tax rate and top up tax, corporate restructurings and holding structures, tax neutrality and distribution regimes. Also covered are filing obligations, safe harbours and transition rules.
The OECD has also published in a separate document a number of examples that illustrate application of the GloBE rules, intended for illustrative purposes only and do not for part of the Commentary. Additional examples may be developed and published in the future to illustrate the application or same or other aspects of the GloBE rules.
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