KPMG report: Global formulary apportionment

Some are asking (again) whether it is finally time to adopt formulary apportionment

Some are asking (again) whether it is finally time to adopt formulary apportionment

The international corporate tax system is in a state of flux, with numerous reform initiatives being proposed by national governments and international institutions. Some academics, and even the European Commission (EC), are asking (again) whether it is finally time to adopt formulary apportionment—an alternate way to allocate taxing rights over multinationals first considered and rejected by the League of Nations in the 1930s. Indeed, some are pointing to the OECD/G20 Inclusive Framework’s work on Pillar One as a first step toward formulary apportionment.

However, a country would face significant challenges if it sought to adopt formulary apportionment unilaterally, from defining a multinational group, to selecting an allocation formula that does not undermine its international competitiveness. In addition, there are substantial obstacles to countries reaching a multilateral agreement to implement formulary apportionment.

Read a 2022 report* [PDF 537 KB] prepared KPMG LLP 

Read related reports on KPMG LLP’s webpage: Future of the Arm's Length Principle

*This article originally appeared in Tax Notes International (22 August 2022) and is provided with permission.


The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. 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. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.