![]() The Pillar One blueprint provides a more comprehensive and structured approach to address Pillar One design architecture principles. Process to improve tax certainty through effective dispute prevention and resolution mechanisms.A fixed return for certain baseline marketing and distribution activities taking place physically in a market jurisdiction (Amount B).New taxing rights for market jurisdictions over a share of the (deemed) residual profits of a multinational enterprise (MNE) or segment of such a group (Amount A).In order to achieve this, Pillar One contains three elements: The aim of Pillar One is to reach a global agreement on adapting the allocation of taxing rights on business profits in a way that expands the taxing rights of market jurisdictions. This area is expected to be contentious in the months ahead as the IF members work through the remaining technical design, political differences and priorities. With nations’ coffers exhausted from tackling the health and economic effects of the COVID-19 pandemic, there is significant political pressure on governments to find new revenue sources. Combined with the US Global Intangible Low-taxed Income (GILTI) regime, the impact could be US$60 to 100 billion per annum, or up to around 4% of global corporate tax revenues.Īgainst this backdrop, as the OECD/G20 Inclusive Framework on BEPS (IF) works towards achieving consensus, a number of countries have already implemented unilateral measures (such as the Digital Service Tax) and other anti-base erosion legislations ahead of a consensus solution envisaged by the BEPS 2.0 project. ![]() Pillar One focuses on defining a new nexus rule and allocating a share of residual profits to the market jurisdictions, while Pillar Two focuses on a global minimum tax intended to address remaining base erosion and profit shifting (BEPS) issues.īased on the OECD’s Economic Impact Assessment published on the same day as the Blueprints, the two pillars could increase annual global corporate tax revenues by approximately US$50 to 80 billion. The Blueprints are a continuation of the work by the OECD since the OECD’s taskforce on digital economy released an interim report in May 2018. We summarise the developments and examine how these may affect taxpayers in Asia-Pacific. This level of international cooperation on matters of taxation is groundbreaking. The Blueprints are currently open for public consultation until 14 December 2020, and public consultation meetings on them will be held in January 2021. Indeed, it is expected that 137 participating countries under the OECD/G20 Inclusive Framework will reach a consensus by mid-2021. While certain technical and political differences remain, the Blueprints are considered a solid foundation for further work. On 12 October 2020, the Organisation for Economic Co-operation and Development (OECD) released its reports on the blueprints of the two-pillar approach to address the tax challenges arising from digitalisation of the economy (Blueprints). Multinational enterprises should monitor and adapt to groundbreaking changes arising coming from BEPS 2.0. ![]()
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