Global Minimum Tax Implementation Framework: public consultation meeting

Key themes presented by the OECD in the public consultation meeting on the global minimum tax Implementation Framework.

Key themes presented by the OECD in the public consultation meeting on the global minimum

On 25 April 2022, the OECD held a public meeting to discuss the feedback it received in response to the recent Pillar Two Implementation Framework (IF) consultation. Following the release of the Global Anti-Base Erosion (GloBE) Model Rules and Commentary, the IF is the next step in the work to implement a global minimum tax, facilitating the coordinated implementation and administration of the Model Rules. The IF will provide agreed administrative procedures, such as filing obligations and multilateral review processes, as well as considering the development of safe harbours to facilitate both compliance by Multinational Enterprises (MNEs) and administration by tax authorities. A public consultation on the IF began on 14 March 2022, focussing on four key areas: further administrative guidance, information collection and reporting, safe harbours and rule coordination and tax certainty. The OECD received over 500 pages of comments. This article summarises the key themes presented by the OECD in the 25 April meeting.

Further administrative guidance

  • Rule Status and Consistency

Respondents requested clarity about the status of Commentary Examples and other guidance. The need for consistent interpretation of the Model Rules in all jurisdictions was also emphasised.

  • Prioritising Guidance

In light of the ambitious implementation timeline for Pillar Two, stakeholders requested that guidance be released on a rolling basis, prioritising key areas. Immediate guidance is requested on issues related to scope and transitional rules. Specific guidance was also requested on areas such as treatment of US global intangible low-taxed income, deferred tax accounting, tax credits and transfer pricing adjustments.

Information collection and reporting

  • Standardised Return

Concerns were raised that differences in the information and format required for reporting across jurisdictions would result in a disproportionate compliance burden for MNEs. Respondents requested a standardised GloBE Information Return to address this.

  • Centralised Filing

The need for centralised filing of Returns in the Ultimate Parent Entity (UPE) jurisdiction was a common theme in the responses received, as well as the need for an effective exchange of information framework, including appropriate data and confidentiality safeguards.

  • Grace Period

The novelty and complexity of the GloBE rules has led many stakeholders to request that good faith mistakes should not trigger any penalty in the early years of the application of the rules.

Safe harbours

  • Country-by-Country Reporting

There was strong support for implementation of a Country-by-Country-Reporting (CbCR) safe harbour. For example, jurisdictions with an effective tax rate (ETR) over a certain percentage (such as 15 percent, plus an extra margin) based on CbCR data.

  • Qualified Domestic Minimum Top-up Tax (QDMTT)

Many responses supported a safe harbour based on the principle there would be no need to compute GloBE ETR for countries that have introduced a QDMTT.

  • Jurisdictional approaches

Jurisdictional approaches to safe harbours were proposed, for example identifying those circumstances where jurisdictions are unlikely to produce low tax for GloBE purposes. This would reduce the compliance burden for MNEs who would only have to perform ETR calculations for jurisdictions outside this safe harbour.

Rule coordination and tax certainty

There were calls for a central and transparent process, conducted at the OECD level, to determine whether a rule is ‘qualified’ for Pillar Two purposes. Dispute resolution was also a key concern, with stakeholders requesting a timely and binding resolution process, either under a new Multilateral Convention or via existing dispute mechanisms.

The OECD has said it will now consider the detail of the submissions received to help it further develop the IF in the coming months.