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UK implementation of Pillar Two: where are we now?

Laura Hodgson, Elena Rowlands and Jessica Kemp (Travers Smith) analyse the UK’s draft multinational top-up tax legislation and consider what developments are still to come.

Background

A two-pillar corporate tax reform plan was agreed between OECD members in October 2021. The two-pillar plan forms part of the OECD’s project tackling base erosion and profit shifting (or BEPS). Whilst Pillar One will only apply initially to MNEs with annual global turnover above €20bn Pillar Two is expected to have a wider impact on businesses.

Pillar Two seeks to establish a global minimum corporate tax rate through a set of interlinked rules. Global anti-base erosion rules (‘the GloBE rules’) will impose top-up taxes where the effective rate of tax of a multinational enterprise in a jurisdiction is below the global minimum corporate tax rate (15%).

The UK government published a consultation in January 2022 on the implementation of the...

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