Bezhan Salehy (Macfarlanes) considers how countries may maintain their tax competitive standing after the implementation of pillar two.
How do the GloBE rules deal with reliefs and incentives?
The GloBE rules measure a group’s ETR in each jurisdiction by comparing the income taxes and profits recorded in its accounts. While a small number of adjustments must be made to both figures these are largely technical in nature and do not replicate the wide range of reliefs and incentives that countries offer through their domestic tax systems. Generally therefore reliefs will tend to reduce a group’s effective tax rate (ETR). Where that ETR falls below 15% top-up tax may be due and some of the benefit of the reliefs may effectively be lost (see the example above right which looks at the UK’s patent box). This is a deliberate policy choice: the GloBE rules are intended...
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Bezhan Salehy (Macfarlanes) considers how countries may maintain their tax competitive standing after the implementation of pillar two.
How do the GloBE rules deal with reliefs and incentives?
The GloBE rules measure a group’s ETR in each jurisdiction by comparing the income taxes and profits recorded in its accounts. While a small number of adjustments must be made to both figures these are largely technical in nature and do not replicate the wide range of reliefs and incentives that countries offer through their domestic tax systems. Generally therefore reliefs will tend to reduce a group’s effective tax rate (ETR). Where that ETR falls below 15% top-up tax may be due and some of the benefit of the reliefs may effectively be lost (see the example above right which looks at the UK’s patent box). This is a deliberate policy choice: the GloBE rules are intended...
If you or your firm subscribes to Taxjournal.com, please click the login box below:
If you do not subscribe but are a registered user, please enter your details in the following boxes:
