Canadian large multinationals may want to review the Organization for Economic Cooperation and Development’s (OECD) new administrative guidance on Pillar Two’s “global anti-base erosion” (GloBE) rules. This new release, which was issued on February 2, 2023, provides additional guidance on the categories of Scope (Article 1 of the GloBE model rules), Income & Taxes (largely Articles 3 & 4), Qualified Domestic Minimum Top-up Taxes (Article 10), operation and transitional elements of the GloBE rules, as well as guidance on how to recognize the U.S. global intangible low-taxed income (GILTI) under these rules. The OECD advises that the guidance is intended to help jurisdictions, (including Canada) to implement the GloBE rules in their domestic legislation as part of its two-pillar solution to address the tax challenges from digitalization of the economy.
As worldwide implementation of these rules is intended to be effective as early as 2024, multinational enterprises (MNEs) should prepare for these upcoming changes by continuing to monitor developments and the timing of legislative proposals in different jurisdictions. In addition, affected MNEs should model the potential impacts of these complex changes and assess the potential financial reporting impact.
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