The rules can impose additional tax on MNE groups when the UPE is a flow-through entity.
From 31 December 2023, the Pillar Two—or global anti-base-erosion (GloBE)—rules will come into effect in jurisdictions around the world. These rules seek to ensure that in-scope multinational enterprise (MNE) groups pay a minimum effective tax rate of 15% in every jurisdiction where they operate. However, the rules can impose additional tax on MNE groups when the ultimate parent entity (UPE) is a flow-through entity, a common structure in the asset management industry, even when the owners of the group are already subject to tax on this income at rates that are well over 15%.
Read a December 2023 report* [PDF 463 KB] prepared by KPMG LLP tax professionals that explains how that outcome seems inconsistent with the policy objectives of Pillar Two and could be addressed through revisions to the rules.
* This article originally appeared in Tax Notes International (18 December 2023) and is provided with permission.