OECD/G20 Inclusive Framework Agreement on BEPS 2.0

On 1 July 2021, in an historic agreement, 130 countries approved a statement providing a framework for reform of the international tax rules. These countries are members of the OECD/G20 Inclusive Framework on BEPS (“IF”), comprising 139 countries. The statement sets forth the key terms for an agreement of a two-pillar approach to reforms and calls for a comprehensive agreement by the October 2021 G20 Finance Ministers and Central Bank Governors meeting, with changes coming into effect in 2023.

Pillar One, of the agreement, is a significant departure from the standard international tax rules of the last 100 years, which largely require a physical presence in a country before that country has a right to tax.  It introduces new taxing rights to market jurisdictions which seek to ensure a fairer distribution of profits and taxing rights among countries with respect to the largest multinational groups. Pillar One, will apply to group’s with turnover of more than €20 billion.

Pillar Two secures an unprecedented agreement on a global minimum level of taxation, which has the effect of stipulating a floor for tax competition amongst jurisdictions.  The statement provides for a minimum tax rate of at least 15% and the details are subject to further negotiations.  Amongst other things the impact of tax incentives on effective tax rates will need to be considered.  Pillar Two is targeted at groups with a turnover of more than €750 million.

It is important for all large businesses who are likely to be in scope, to assess the impact of these proposals on their businesses and in particular, on their likely effective tax rate and on the additional resources required to comply with the complex measures.

A copy of the publication with further insights and KPMG’s observations can be accessed via the above link.

Should you have any questions or require further clarification, please do not hesitate to email any of our Executive Directors, Directors, Associate Directors or Managers whom you are accustomed to dealing with or who are responsible for the tax affairs of your organisation.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Tai Lai Kok

Executive Director
- Head of Tax

Nicholas Crist

Executive Director
- Corporate Tax

Bob Kee

Executive Director
- Head of Transfer Pricing