The OECD has published its programme of work for arriving at an international approach to taxing activities of multinational enterprises by the end of 2020. The plan states that agreement on an outline will need to be reached by January 2020 in order to meet this deadline.
As set out in its policy note in January, discussions will focus on two main ‘pillars’:
Within pillar one, three proposals have been put forward for determining the taxing rights of the market or user countries where value is created, based on:
Key to these potential approaches is that all three contemplate the existence of a nexus even without physical presence.
The work under pillar one is grouped into three main blocks:
Discussions on the new profit allocation rules will examine three alternative approaches:
The new nexus rule will explore the concepts of:
Pillar two, now referred to as a global anti-base erosion system (GloBE), seeks to plug some of the gaps left when the BEPS reports were finalised at the end of 2015, to ensure all multinational businesses pay a minimum effective rate of tax. The aim is to develop two inter-related rules:
The OECD will present its programme of work to G20 finance ministers at their meeting in Japan on 8 and 9 June. A progress report is expected in December 2019. See bit.ly/2WovaHf.
The number of countries involved in the discussions has increased from 42 at the launch of the BEPS action plan in 2013, to the current total of 129 countries in the inclusive framework. The OECD acknowledges the challenge it will face in reaching agreement on such fundamental and extensive changes to existing rules underpinning the international tax system.
Eloise Walker, tax partner at Pinsent Masons, believes it will be ‘a tall order’ for the OECD to make real progress on this by January 2020. However, similar things were said of the BEPS action plan and the multilateral instrument, so if the OECD ‘can get the major political players to engage constructively, they may yet pull this off too’, Walker said.
‘Quite what the “GloBE” would mean for the UK is unclear’, Walker added. ‘The UK already leads the way worldwide in the breadth and depth of its anti-avoidance rules, from its controlled foreign company regime to increasingly draconian stance on transfer pricing, the diverted profits tax to taxing offshore intangibles’, she said, expressing concern about how the new rules might fit into the UK’s ‘over-stuffed code’.
The OECD has published its programme of work for arriving at an international approach to taxing activities of multinational enterprises by the end of 2020. The plan states that agreement on an outline will need to be reached by January 2020 in order to meet this deadline.
As set out in its policy note in January, discussions will focus on two main ‘pillars’:
Within pillar one, three proposals have been put forward for determining the taxing rights of the market or user countries where value is created, based on:
Key to these potential approaches is that all three contemplate the existence of a nexus even without physical presence.
The work under pillar one is grouped into three main blocks:
Discussions on the new profit allocation rules will examine three alternative approaches:
The new nexus rule will explore the concepts of:
Pillar two, now referred to as a global anti-base erosion system (GloBE), seeks to plug some of the gaps left when the BEPS reports were finalised at the end of 2015, to ensure all multinational businesses pay a minimum effective rate of tax. The aim is to develop two inter-related rules:
The OECD will present its programme of work to G20 finance ministers at their meeting in Japan on 8 and 9 June. A progress report is expected in December 2019. See bit.ly/2WovaHf.
The number of countries involved in the discussions has increased from 42 at the launch of the BEPS action plan in 2013, to the current total of 129 countries in the inclusive framework. The OECD acknowledges the challenge it will face in reaching agreement on such fundamental and extensive changes to existing rules underpinning the international tax system.
Eloise Walker, tax partner at Pinsent Masons, believes it will be ‘a tall order’ for the OECD to make real progress on this by January 2020. However, similar things were said of the BEPS action plan and the multilateral instrument, so if the OECD ‘can get the major political players to engage constructively, they may yet pull this off too’, Walker said.
‘Quite what the “GloBE” would mean for the UK is unclear’, Walker added. ‘The UK already leads the way worldwide in the breadth and depth of its anti-avoidance rules, from its controlled foreign company regime to increasingly draconian stance on transfer pricing, the diverted profits tax to taxing offshore intangibles’, she said, expressing concern about how the new rules might fit into the UK’s ‘over-stuffed code’.