Government eases access to defined benefit pension surpluses

On 17 June 2024, the OECD/G20 Inclusive Framework (IF) released further guidanceopens in a new tab clarifying and simplifying the application of Pillar Two rules alongside an overview of the streamlined process for recognising the qualified status of the legislation of jurisdictions implementing the Global Anti-Base Erosion (GloBE) Rules. 

A high-level summary is provided below. KPMG International will shortly be publishing more detailed commentary which we will share in the next edition of Tax Matters Digest.

Administrative Guidance

This fourth package of the Administrative Guidance (144 pages) on the implementation of Pillar Two sets out guidance on some of the key technical areas along with suggested simplified procedures for application of the Pillar Two rules. 

It covers a number of key topics where consistency and simplifications were sought by IF members and stakeholders including:

• Simplified procedures that will allow Multinational Enterprise (MNE) Groups to aggregate various categories of deferred tax liabilities for determining whether they have reversed within five years and therefore do not need to be recaptured;
• Clarification on the methodology used to determine deferred tax assets and liabilities for GloBE purposes;
• Guidance on allocation of cross-border current and deferred taxes and the profits and taxes on certain flow-through entities and structures; and
• Treatment of securitisation vehicles under a jurisdiction's domestic minimum top-up tax that will prevent these vehicles giving rise to volatile outcomes under the GloBE Rules.

It was confirmed that this new guidance will be incorporated into the Consolidated Commentary to the GloBE Model Rulesopens in a new tab.

Qualified status

The IF Secretariat has published a Question & Answer documentopens in a new tab summarising the main features of a Transitional Qualification Mechanism. This mechanism will provide jurisdictions with the certainty that their rules will be recognised as qualified by other implementing jurisdictions for a transitional period, while a full legislative review is being undertaken, and will provide MNEs with certainty as to which jurisdiction’s rules it must comply with in line with the agreed rule-order.

Country by Country Reporting (CbCR) Safe Harbour guidance

The OECD release also provides a summary of recently published guidance on the CbCR Safe Harbour, including additional interpretative CbCR guidance published on 27 May 2024 which was discussed in the last editionopens in a new tab of Tax Matters Digest. Nothing further was published on this on 17 June.