We already have guidance on Pillar 2, now what?

Almost 10 years after the launch of the OECD BEPS project, the European Union Has reached an agreement to implement the guidance for Pillar 2 and the introduction of a global minimum effective tax of 15% for large groups, wherever they operate. Starting with considerations of tax justice and tax ethics, BEPS has as one of the main business branches to address the tax challenges of the digital economy to avoid artificial reduction of tax bases and transfer of benefits.

The EU agreement was particularly complicated by the unanimity required to approve the directive proposal and the non-financial clauses — linked to Poland and Hungary’s veto power — that prevented such consensus being achieved earlier. But after the embargo was lifted on the situation with Poland and Hungary, an agreement was reached It will have very material consequences in the field of international taxation. that?

an agreement European Union It will drive the adoption of Pillar 2 globally. Although some countries, such as Korea, the Netherlands, Switzerland and the United Kingdom, have already submitted draft regulations, others, such as Australia, Canada, Hong Kong, Malaysia, Mexico or Singapore, have formally declared their willingness to adopt Pillar 2 in their respective legal systems. Of them, the implementation of the EU-wide directive It would be a suitable boost to the global adoption of Pillar 2.

Thus, the EU-wide application of the levying rules—both the income inclusion rule and the insufficient tax payments rule—should encourage the adoption of Pillar 2 in other countries outside the Union. This would occur as a defense mechanism for bundling scenarios with respect to the EU which could be avoided if Pillar 2 regulations were implemented in those countries. in the same vein, Should stimulate the introduction of national supplementary taxes As a line of defense in activating Pillar 2 for a particular jurisdiction.

And then we have the unknowns of the United States, which provided a Alternative minimum tax in his speech Inflation Reduction Act Which, while similar to the method for calculating the effective tax rate for Pillar 2, deviates from it in a material way. This may offend some US taxpayers Alternative minimum tax Subject to an effective tax rate for Pillar 2 purposes of less than 15%, therefore, Subject to applicable pillar 2 shipping standards if it is Alternative minimum tax Finally, it is not a valid supplemental national tax for the purposes of Pillar 2.

It also remains to be seen the political will United State To comply with the European Union and other countries in the overall framework, because in the end certain major taxes have not been modified in order to make this compatibility, such as GILTI or BEAT. Being a major actor, his movements must be followed closely.

Another related issue is the interrelationship between Pillar 1 and Pillar 2 and the motivation that the Agreement implementing the Directive on Pillar 2 could have in adopting Pillar 1 – which seeks to ensure a more equitable distribution of tax benefits and rights between countries in relation to the largest multinational corporations – both in European Union or worldwide. And so, Poland has been very vocal when it comes to inserting language into the conclusions of the agreement specifying that the EU’s design is to implement both Pillar 1 and Pillar 2 and that commission You should keep an eye on the Pillar 1 Multilateral Instrument negotiations. Will pillar 2 therefore give momentum to pillar 1? A priori it seems so, but we’ll have to see.

The nuanced picture of the new tax on the rich: Doubts, defections, and paradoxes

Oscar Jimenez

Pillar 1 and Pillar 2 are the solution to L’s financial challenges The digital economy? It’s a question that doesn’t have an easy answer. Pillar 2, although it does not contain a sectoral approach, will tax the benefits of large groups globally, including those whose businesses have a high rate of digitization. Pillar 1 for its part, and if it is finally implemented, It will help to partially redistribute the profits and tax rights of the largest multinational groupsincluding digital giants, and will remove local taxes on digital services.

Sensu contriario, Pillar 1 and Pillar 2 will not affect smaller groups, however digital they may be, nor will they redistribute most of the benefits of digital giants. So the answer should be “Yes, but…”. To continue, stay tuned for your screens.

* Jose Antonio Tortosa He is a partner in the international tax area of ​​KPMG Abogados.

Almost 10 years after the launch of the OECD BEPS project, the European Union Has reached an agreement to implement the guidance for Pillar 2 and the introduction of a global minimum effective tax of 15% for large groups, wherever they operate. Starting with considerations of tax justice and tax ethics, BEPS has as one of the main business branches to address the tax challenges of the digital economy to avoid artificial reduction of tax bases and transfer of benefits.