The Organization for Economic Co-operation and Development (OECD) says world leaders have officially agreed to a comprehensive overhaul of international tax law and will impose a new global minimum tax of 15% on corporate profits.
Future global minimum tax laws are emerging
Proponents of her case have been working to make the actual transcript of this statement available online.
The agreement also aims to amend international tax laws to reflect the reality of the digital age. The New York Times noted that the law would allow countries to levy tax on companies that sell services instead of levying tax on operating companies. These changes are likely to have a significant impact on the European operations of American technology companies.
Many of these companies are headquartered in Ireland, which benefits from its low 12.5% tax rate but sells services across the continent.
This Monday was a significant milestone in the implementation of the international tax treaties ratified by 137 countries in October last year. On Monday, the Organization for Economic Co-operation and Development (OECD) announced an implementation model of its reform column 2, setting the minimum tax rate for multinational companies at 15% for the first time.
The big companies involved, companies with a turnover of more than 750 million euros and tax rates below 15%, are eagerly waiting for this handbook and will finally know what awaits them. By avoiding technical discussions, they will be immersed in a dense document of about 70 pages published by the OECD.
The first rules were finally revealed
The new model laws for the second pillar will enable countries to incorporate the GloBE Act into their national legislation by 2022.
Defines multinational enterprises within the limits of the minimum tax
Establish a mechanism to calculate the effective tax rate of a multinational enterprise by jurisdiction and to determine the additional tax payable by law
Additional taxes are levied in accordance with the rules approved by the members of the multinational enterprise groups.
The rules of the second column model deal with the treatment of group structures for acquisition and removal, and include special rules for the treatment of specific holding structures and tax-neutral systems. Finally, these laws include administrative aspects, including reporting requirements, and provide transitional rules for multinational companies to pay the lowest taxes in the world.
In early 2022, it will publish comments on the OECD models and discuss cooperation with the U.S. Global Intangible Law Tax Income (GILTI) laws. An implementation framework will be developed focusing on governance, compliance and coordination issues related to the second pillar. The Inclusive Framework defines model clauses for tax liability laws and the versatility of their implementation, which will be published in early 2022. A public consultation on the implementation framework will be held in February, and the tax liability will be implemented in March. .
Finally, a policy that allows companies to carry losses indefinitely does not require a revaluation. Model rules specifically allow for losses. This allows tax laws to reduce the likelihood of complying with minimum tax rules, as the business is in the startup phase and requires a high amount of upfront costs. As with capital deductions, many countries have relaxed their loss-making policies in response to the Pandemic.
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