The Organisation for Economic Co-operation and Development on Monday released the pillar two model rules for the domestic implementation of the 15 per cent global minimum tax.
The new rules offer governments a precise template for taking forward the two-pillar solution to address the tax challenges arising from the digitalisation and globalisation of the economy, agreed to in October by 137 countries and jurisdictions under the OECD/G20 inclusive framework on base erosion and profit shifting (BEPS).
The model rules are a significant building-block in the development of a two-pillar solution, converting the foundations of a political agreement reached in October into enforceable rules, said Pascal Saint-Amans, director of the OECD centre for tax policy and administration.
“The fact that inclusive framework members have managed to reach a consensus on this detailed and comprehensive set of technical rules demonstrates their commitment to a co-ordinated solution to addressing the challenges raised by an increasingly digitalised and globalised economy,” said Mr Saint-Amans.
The October deal sets a tax minimum for countries that are seeking to attract investment and jobs by offering multinationals low taxes.
The tax floor also makes it harder for multinationals, especially US tech companies, to avoid taxation.
The new minimum tax rate will apply to companies with revenue above €750 million ($868m).
The rules also address the treatment of acquisitions and disposals of group members, and include specific rules to deal with particular holding structures and tax neutrality regimes.
With this latest update to final global minimum tax rules, companies operating in the UAE and Gulf Co-operation Council countries need to develop response strategies that assess the financial and non-financial impact of the new taxation laws, industry experts said.
“As local and regional businesses move towards this new taxation regime, global statutory responsibilities and compliance obligations should not be overlooked,” said Shabana Begum, partner and head of transfer pricing at KPMG Lower Gulf.
“From a compliance and restructuring perspective, companies need to conduct an impact assessment across their value chain and on different business functions and operations as well as the existing ERP [enterprise resource planning] system from a technical compatibility standpoint to be better prepared for the transition,” she added.