August 2024: BEPS Pillar 2 Highlights

---

• Australia:
  • Pillar 2 Global Minimum Tax Legislation Introduced in Parliament
  • ATO Setting Up Pillar Two Global and Domestic Minimum Tax Working Group
• India:
  • Holding Out on Pillar 1 Over Certain Concerns While Preparing to Implement Pillar 2
  • Institute of Chartered Accountants of India Amends Income Tax Accounting Standard in Relation to Pillar 2 Global Minimum Tax
• Cyprus: Consents to All Pillar 2 Safe Harbors and Administrative Guidance
• Colombia, Zimbabwe: Reviewing Domestic Minimum Tax Rules to Align with OECD Pillar 2
• Belgium:
  • Publishes Royal Decree on Advance Payments for the New Pillar 2 Global Minimum Tax
  • Extends Initial Pillar 2 Notification Requirements for Groups Not Carrying Out Advance Payments in 2024 for the Domestic Top-Up Tax or the IIR
• Turkey: Turkey Enacts Tax Reform Legislation Including Pillar 2 Global Minimum Tax (Approved)
• Portugal:
  • Consulting on Draft Bill to Implement Pillar 2 Global Minimum Tax
  • Council of Ministers Approves Tax Program Including Corporate Tax Rate Reduction, Pillar 2 Global Minimum Tax, and Other Measures
• Austria: Parliament Approves Tax Amendment Act 2024 Including VAT and Group Loss Measures and Pillar 2 Safe Harbor Rule Guidance
• UK:
  • Publishes Guidance on Preparing for the Multinational Top-up Tax and the Domestic Top-up Tax
  • UK HMRC Publishes Draft Legislation to Implement Transitional Country-by-Country Reporting Safe Harbour Anti-Arbitrage Rule
• OECD: Consults on Draft User Guide for the GloBE Information Return XML Schema
• Kazakhstan: Consults on Signing Multilateral Instrument for Pillar 2 Subject to Tax Rule
• Italy: Publishes Implementing Decree for Qualified Domestic Minimum Top-up Tax
• Gibraltar: 2024 Budget Address Delivered Including 15% Corporate Tax Rate and Plans for Pillar 2 Top-up Tax and Income Inclusion Rule
• Vietnam: New Draft Corporate Income Tax Law
• Israel: Planning to Implement Pillar 2 QDMTT in 2026

---

Australia

Pillar 2 Global Minimum Tax Legislation Introduced in Parliament

Australian Treasurer Jim Chalmers has announced the introduction of legislation in parliament for the implementation of the Pillar 2 global minimum tax, including the:

• Imposition Bill: Taxation (Multinational—Global and Domestic Minimum Tax) Imposition Bill 2024;
• Assessment Bill: Taxation (Multinational—Global and Domestic Minimum Tax) Bill 2024; and
• Consequential Bill: Treasury Laws Amendment (Multinational— Global and Domestic Minimum Tax) (Consequential) Bill 2024.

The Imposition Bill imposes top-up tax, namely Australian Domestic Minimum Tax (DMT) tax, Australian Income Inclusion Rule (IIR) tax, and Australian Undertaxed Profits Rule (UTPR) tax. The Assessment Bill implements the framework for the imposition of top-up tax for the DMT, IIR, and UTPR consistent with the GloBE Rules. The Consequential Bill contains consequential and miscellaneous provisions necessary for the administration of top-up tax, consistent with the existing administrative framework under Australian tax law and the GloBE Rules. Australian DMT tax and Australian IIR tax will apply for fiscal years beginning on or after 1 January 2024. Australian UTPR tax will apply for fiscal years beginning on or after 1 January 2025.

New legislation to ensure multinationals pay a fairer share

The Albanese Government has introduced legislation to deliver on our election commitment to improve tax transparency and integrity.

This is all about ensuring multinational companies pay a fairer share of tax in Australia.

To pay for the things that matter most to Australians like healthcare, education and defence, it’s important that multinationals that operate in Australia pay a reasonable amount of tax and that’s what our legislation will help to achieve.

The new laws will set a 15 per cent global minimum tax and domestic minimum tax for all multinational enterprise groups with an annual global revenue of at least EUR 750 million (approximately A$1.2 billion) effective from 1 January 2024.

These measures bring us into line with many other nations, including the biggest economies in the world that are all cracking down on multinationals to ensure they are paying a fairer share of tax.

This legislation delivers on the Albanese Government’s 2023–24 Budget announcement to implement the minimum taxes under Pillar Two of the OECD/G20 Two Pillar Solution, a multilateral agreement supported by more than 140 nations.

Stopping a global race to the bottom in company tax helps all Australians. When multinationals pay less, individuals and domestic businesses pay more.

The legislation we’re introducing to the House today, reflects several rounds of consultations and continued engagement with stakeholders to ensure these minimum taxes operate as intended and minimise unnecessary compliance burdens.

Our economic plan is all about helping fight inflation and easing the cost of living at the same time as we get the Budget in much better nick.

An international tax system where big multinationals pay a fairer share is better for small businesses, better for taxpayers and better for the economy.

ATO Setting Up Pillar Two Global and Domestic Minimum Tax Working Group

The Australian Taxation Office (ATO) has announced that it is setting up a working group to support consultation on the implementation of the Pillar Two global minimum tax in Australia, with applications to join the group due by 9 August 2024.

Pillar Two Global and Domestic Minimum Tax Working Group

Submit an EOI by 9 August 2024 if you want to help us implement Pillar Two global and domestic minimum tax.

We’re setting up a special purpose working group to support consultation on how we implement Pillar Two global and domestic minimum tax in Australia for multinational businesses.

Through consultation, the working group will seek feedback on administrative aspects of the implementation of this new measure, including:

• the design of 2 new Australian tax returns, keeping in mind domestic requirements for an approved form to enable assessment and collection of a Top-up Tax:
  • Australian income inclusion rule and undertaxed profits rule tax return (AIUTR)
  • Domestic minimum tax return (DMTR)
• the resources, systems and processes that multinational businesses are considering, or may already have in place, in response to the announced measure, including system builds and services provided by software designers
• how we can support implementation through public advice and guidance, and co-designing client engagement approaches.

Membership requirements

If you become a member of the working group, we’ll expect you to:

• bring relevant knowledge and expertise, either from your own experience or by canvassing members of the organisation you represent
• maintain confidentiality and act in line with the ATO consultation framework
• engage in good faith and respect the expertise and contributions of others
• disclose matters that are or could be perceived to be conflicts of interest and take appropriate action to manage or mitigate those conflicts
• sign an integrity declaration that includes agreeing to meet your tax, super and registry obligations.

How to apply

If you would like to apply, send a one-page expression of interest (EOI) to Pillar2Project@ato.gov.au by 5:00 pm (AEST) Friday 9 August. In your EOI, outline:

• your experience and knowledge, relating to the global and domestic minimum tax measure
• how the measure affects your organisation or your role as an adviser.

India

Holding Out on Pillar 1 Over Certain Concerns While Preparing to Implement Pillar 2

India’s Ministry of Finance has reportedly stated that it will not agree to the implementation of Pillar 1 of the OECD’s two-pillar solution on the reallocation of taxing rights until certain concerns are addressed. Among other things, this includes concerns regarding dispute resolution, which India does not want subject to international arbitration, as well as concerns regarding the treatment of withholding tax. At the same time, the Ministry has appointed a panel to prepare for the implementation of the Pillar 2 global minimum tax. Additional details will be published once available.

Institute of Chartered Accountants of India Amends Income Tax Accounting Standard in Relation to Pillar 2 Global Minimum Tax

The Institute of Chartered Accountants of India has announced amendments to the income tax accounting standard in relation to the Pillar 2 global minimum tax, including a temporary exception to the requirements to recognize and disclose information about deferred tax assets and liabilities related to Pillar 2 taxes, as well as targeted disclosure requirements for affected entities.

Amendments to AS 22, Accounting for Taxes on Income issued by the ICAI
(For non-company entities)

International Tax Reform-Pillar Two Model Rules

The Pillar Two Model Rules, released on 20 December 2021, are part of the Two-Pillar Solution to address the tax challenges of the digitalisation of the economy that was agreed by 137 member jurisdictions of the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting’s Statement (BEPS) and endorsed by the G20 Finance Ministers and Leaders in October 2021. The Pillar Two Model Rules are designed to ensure large multinational enterprises (MNEs) pay a minimum level of tax on the income arising in each jurisdiction where they operate

Considering that entities may need time to determine how to apply the principles and requirements in AS 22, Accounting for Taxes on Income (issued by the ICAI) to account for deferred taxes related to top-up tax, the Council of the ICAI decided to introduce a temporary exception to the requirements in AS 22 (issued by the ICAI) to recognise and disclose information about deferred tax assets and liabilities related to Pillar Two income taxes because once the Pillar Two Model Rules are enacted in India, these amendments would be relevant to the non-company entities applying Accounting Standards issued by the ICAI and to whom Pillar Two Model Rules will be applicable.

The amendments introduce:

• a temporary exception to the requirements to recognise and disclose information about deferred tax assets and liabilities related to Pillar Two income taxes; and
• targeted disclosure requirements for affected entities.

Amendments to AS 22, Accounting for Taxes on Income issued by the ICAI for non-company entities are effective for annual reporting periods beginning on or after April 1, 2024. The same can be accessed at the following link:

https://resource.cdn.icai.org/81275asb65510.pdf

Cyprus

Consents to All Pillar 2 Safe Harbors and Administrative Guidance

The Cyprus Ministry of Finance has issued a release announcing that Cyprus has consented to all safe harbors and administrative guidance issued by the BEPS Inclusive Framework for the Pillar 2 Global Minimum Tax. The release notes that, despite not being a member of the Inclusive Framework, Cyprus supports the two-pillar solution and, as required by Article 32 of Council Directive (EU) 2022/2523 of 14 December 2022, Cyprus provides its full assurance and consent to the Safe Harbor rules as provided in the OECD Pillar 2 guidance issued in December 2022, July 2023, December 2023, and June 2024.

Note that Cyprus has not yet completed its implementation of the Pillar 2 global minimum tax as required by Council Directive (EU) 2022/2523 and was sent a reasoned opinion by the European Commission in May 2024. Further updates on its implementation will be published once available.

Colombia, Zimbabwe

Reviewing Domestic Minimum Tax Rules to Align with OECD Pillar 2

The Colombian and Zimbabwean governments are considering whether they need to amend their corporate minimum tax regimes to bring them into closer alignment with the OECD global anti-base-erosion (GLOBE) rules.

Colombia who made the decision to adopt its own 15% domestic minimum top-up tax before the OECD published the GLOBE model rules, is now assessing the initial results of applying the minimum tax according to Andrea del Pilar Prieto, international taxation adviser at Colombia’s National Directorate of Taxes and Customs. Colombia enacted a tax reform law in December 2022 that includes several measures, including a GLOBE-rule-inspired 15% domestic minimum top-up tax, calculated using financial profits. The tax applies to Colombian companies, although some types of companies, like those with special economic zone status, are exempt. According to Prieto, Colombia is not rushing to implement the GLOBE rules — the income inclusion rule and the undertaxed profits rule — because they are not OECD minimum standards and because Colombia doesn’t have many multinational enterprises that would be in scope of the rules. Rather according to Prieto “we are taking . . . time to assess how best to proceed with these rules, because this merits a serious cost-benefit analysis, and we also want to see and reflect on what will be the effects after the implementation of IIRs, UTPRs, and [qualified domestic minimum top-up taxes] by European countries and other key partners.”

Zimbabwe, which is not an inclusive framework member, introduced a 15% domestic minimum top-up tax in the Finance Act 2023 (No. 13 of 2023) which took effect 1 January 2024. The government is now getting assistance from organizations like the African Tax Administration Forum to see how the tax can be modified to be consistent with the GLOBE rules within the limits of Zimbabwe’s laws, according to Mathias Chinanayi, head of technical services at the Zimbabwe Revenue Authority.

Belgium

Publishes Royal Decree on Advance Payments for the New Pillar 2 Global Minimum Tax

On 16 July 2024, Belgium published the Royal Decree of 7 July 2024 in the Official Gazette, which establishes the rules for companies to make advance payments of the minimum tax under the Pillar 2 global minimum tax rules in Belgium. Among other things, this includes that payments may only be made to the financial accounts of the “Collection Centre – Advance Payments Service” by payment or transfer. The Decree enters into force on 1 September 2024.

Extends Initial Pillar 2 Notification Requirements for Groups Not Carrying Out Advance Payments in 2024 for the Domestic Top-Up Tax or the IIR

On 2 July 2024, Belgium’s Federal Public Service (SPF) Finance issued a notice on an extension of the initial deadline for the submission of the registration notification for the Pillar 2 global minimum tax until 16 September 2024 for groups that will not carry out advance payments in 2024 for the domestic top-up tax or the IIR. As previously reported, Royal Decree of 15 May 2024 regulated the new notification requirements for large multinational and domestic groups subject to the Pillar 2 global minimum tax rules in Belgium. Such groups are required to register with the Crossroad Bank for Enterprises register (Banque-Carrefour des Entreprises – BCE), which involves the submission of a notification via MyMinfin (My professional tools > Pillar 2 – Mes outils professionnels > Pilier 2). The notification obligation applies as soon as the following two conditions are met:

• The group’s consolidated revenue exceeds EUR 750 in at least two of the previous four years; and
• A constituent entity of the group is established in Belgium.

Under the standard rules, the notification must be submitted no later than 30 days after the beginning of the tax year in which the group falls within the scope of the rules. However, the initial deadline is within 45 days of the publication of the Royal Decree of 15 May 2024 in the Belgian Official Gazette, which is 13 July 2024 considering the 29 May 2024 publication date, unless the conditions for the extension to 16 September 2024 are met.

SPF Finance has also recently issued an FAQ on the notification form, which is currently available in French and Dutch.

Turkey

Turkey Enacts Tax Reform Legislation Including Pillar 2 Global Minimum Tax (Approved)

The Turkish Revenue Administration has announced the publication of Law No. 7524 in the Official Gazette on 2 August 2024. The law contains various tax reform measures, including measures for the implementation of the Pillar 2 global minimum tax in line with the GloBE rules approved by the BEPS Inclusive Framework. This includes a domestic minimum top-up tax, an income inclusion rule (IIR), and an undertaxed profits rule (UTRP) that apply to MNE groups with annual group revenue exceeding the Turkish lira equivalent of EUR 750 million in at least two of the four preceding accounting periods (years). The domestic minimum top-up tax and the IIR apply for accounting periods beginning on or after 1 January 2024, while the UTPR applies for accounting periods beginning on or after 1 January 2025. The law also includes certain safe harbors, including the transitional country-by-country reporting safe harbor and the transitional UTPR safe harbor.

Some of the other important measures of the law include:

• The introduction of a domestic minimum corporate tax (separate from the global minimum tax), providing that the corporate tax calculated cannot be lower than 10% on corporate income before deductions and exemptions, with an exemption from the minimum tax for companies in the first three years of operation;
• An increase in the corporate tax rate from 25% to 30% on profits obtained within the scope of the Build-Operate-Transfer Model and Public-Private Partnership Projects;
• The introduction of a new condition for the existing income tax exemption for investment funds and partnerships investing in real estate, which provides that for the exemption to apply, at least 50% of income from real estate must be distributed as a profit distribution (dividends) by the end of the second month following the submission of the corporate tax return for the accounting period in which the income was earned;
• A change in the exemption for businesses operating in free zones, providing that the exemption is limited to export income and no longer applies to income from domestic sales; and
• New rules providing that where VAT amounts to be deducted are carried forward more than 5 years without deduction, it is possible to remove the carried forward amount from the VAT deduction account and to take them into account as an expense for the determination of income or corporate tax.

The other measures of the law generally apply from 2025, except for the VAT measure which takes effect on 1 January 2023.

Portugal

Consulting on Draft Bill to Implement Pillar 2 Global Minimum Tax

Portugal’s Secretary of State for Fiscal Affairs has launched a public consultation on a draft bill for the implementation of the Pillar 2 global minimum tax in accordance with Council Directive (EU) 2022/2523 of 14 December 2022. The deadline for comments is 31 July 2024.

The draft bill includes the introduction of the Pillar 2 income inclusion rule (IIR) and the undertaxed payment/profit rule (UTPR) in order to ensure a minimum tax level of 15% for MNE groups with annual consolidated revenue of at least EUR 750 million in at least two of the last four immediately preceding financial years. The draft bill also provides for the introduction of a qualified domestic minimum top-up tax (QDMTT).

Subject to approval and publication in the Official Gazette, the IIR and QDMTT will apply to fiscal years beginning on 1 January 2024 and the UTPR will generally apply to fiscal years beginning on or after 1 January 2025. However, the UTPR will apply to tax years beginning on or after 1 January 2024 in respect of constituent entities of groups whose ultimate parent companies are located in an EU Member State that has exercised the option for a deferred application of the IIR and UTPR as allowed by Article 50 of the Directive.

Council of Ministers Approves Tax Program Including Corporate Tax Rate Reduction, Pillar 2 Global Minimum Tax, and Other Measures

Portugal’s Council of Ministers approved a tax program on 4 July 2024 that contains 60 measures meant to accelerate the economy. Some of the main measures include:

• A gradual reduction in the 21% corporate tax rate to 19% in 2025, 17% in 2026, and 15% from 2027, along with a reduction in the 17% rate for SMEs to 12.5% over the same period;
• The implementation of the Pillar 2 global minimum tax in accordance with Council Directive (EU) 2022/2523;
• The introduction of a VAT group regime from 2025, along with an increase in the turnover thresholds for the cash VAT regime from EUR 500,000 to EUR 2 million in the previous year;
• The expansion of access to the participation exemption regime for dividends and capital gains received by companies in Portugal through a reduction in the minimum participation (holding) percentage from 10% to 5%;
• An increase in the deductibility limit for financing expenses incurred in mergers from EUR 1 million to the greater of EUR 2 million or 30% of EBITDA; and
• The introduction of a new talent attraction regime to incentivize scientific research, innovation, and human capital to cover a wider range of qualified professions and companies, including a flat 20% tax rate on labor income of qualifying professionals.

Additional details on the implementation of the program measures will be published once available.

Austria

Approves Tax Amendment Act 2024 Including VAT and Group Loss Measures and Pillar 2 Safe Harbor Rule Guidance

On 11 July 2024, Austria’s Federal Council (upper house of parliament – Bundesrat) approved the Tax Amendment Act 2024 (AbgÄG 2024), which was approved by the National Council (lower house of parliament) earlier in the month. Several measures of the Act concern VAT, including:

• An increase in the turnover threshold for the VAT exemption scheme for small businesses from EUR 35,000 to EUR 42,000;
• The extension of the VAT exemption scheme for small businesses to businesses in other EU Member States, provided that turnover in Austria does not exceed the above threshold and total turnover in the EU does not exceed EUR 100,000; and
• The addition of food donations to charitable organizations as VAT exempt.

The Act also contains new rules regarding the deduction of losses in a new group. This includes that losses of a group parent that can be carried forward from periods before the existence of the group (pre-group losses) cannot be offset to the extent that they include previously deductible write-downs to the lower going concern value and losses on the disposal of investments in companies that were already members of another group at the time of the write-down or disposal. Lastly, amendments are made to the Minimum Taxation Reform Act (MinBestRefG) to incorporate the latest OECD guidance on the temporary safe harbor rules for the Pillar 2 global minimum tax issued in December 2023.

UK

Publishes Guidance on Preparing for the Multinational Top-up Tax and the Domestic Top-up Tax

UK HMRC has published guidance on How to prepare for the Multinational Top-up Tax and the Domestic Top-up Tax.

How to prepare for the Multinational Top-up Tax and the Domestic Top-up Tax

1. UK adoption of Organisation for Economic Cooperation and Development (OECD) Pillar 2 model rules

1.1 Background

In October 2021, the UK and over 135 other countries agreed as part of the OECD Inclusive Framework to a two-pillar solution to reform the international corporate tax framework in response to the challenges of digitalisation.

Pillar 2 of this solution, known as the Global Base Erosion (GloBE) rules, requires a group with consolidated annual revenues of more than €750 million to pay a minimum 15% tax on its profits in each jurisdiction it operates in.

As part of the UK adoption of the OECD Pillar 2 rules, the government has announced 2 new taxes:

• the Multinational Top-up Tax (MTT)
• Domestic Top-up Tax (DTT)

These will apply to accounting periods that begin on or after 31 December 2023.

1.2 Multinational Top-up Tax and Domestic Top-up Tax

Multinational Top-up Tax

MTT will require all groups with both UK and non-UK entities and sufficient consolidated revenue to register with HMRC. A charge may arise on UK parent members within such a group, where a UK parent member has an interest in an entity in a non-UK jurisdiction, and the group’s profits arising in that jurisdiction are taxed below the minimum rate of 15%.

Domestic Top-up Tax

DTT will require all groups with UK entities and sufficient consolidated revenue to register with HMRC. A charge may arise on UK members within a domestic or multinational enterprise group where UK profits are taxed below the minimum rate of 15%.

2. How to prepare for these changes

Businesses will need to prepare for complying with MTT and DTT in the UK, as well as the adoption of Pillar 2 in other jurisdictions.

Work at the OECD is ongoing to ensure that implementation of Pillar 2 rules is coordinated to achieve better tax certainty for businesses and reduce compliance costs.

To help you meet your UK obligations, I have included our first ‘Pillar 2 update’ with this letter. We will offer more updates and support before the new rules come in.

3. UK legislation

The UK legislation includes a proposed reporting process which includes:

• a requirement for groups with consolidated revenue above €750 million to register with HMRC when they first come into scope of the Pillar 2 rules
• an annual Self Assessment return to report details of the group’s MTT and DTT liabilities
• the requirement to submit a GloBE Information Return (GIR) which shows the group’s global Pillar 2 tax calculations, or to submit an overseas return notification (where an information return has been submitted to another qualifying authority)

Groups will have UK obligations even if they do not have MTT or DTT liabilities. These obligations will apply to both UK-headed and non-UK headed groups irrespective of whether the jurisdiction of the Ultimate Parent Entity implements Pillar 2.

4. HMRC online service

We’re developing a new online service to enable businesses to meet their MTT and DTT obligations. This will include the ability to register, file returns and make payments. We plan to release the service in stages.

The first stage will allow you to register for the new taxes and make a payment on account if you want to. We’re aiming to complete this by Spring 2024, well in advance of your registration deadline, which is 6 months from the end of the accounting period in which your group became a qualifying group.

5. Guidance

We published draft guidance in July 2023 as part of a consultation exercise. The guidance provides an overview of MTT and DTT as well as covering the scope and administration of the taxes. The consultation ended in September 2023 and we’re reviewing the responses we received.

The OECD has also published a further administrative guidance and new guidance on the GloBE Information Return:

• Agreed administrative guidance – published July 2023
• GloBE Information Return – published July 2023

6. Pillar 2 scope and compliance obligations

To help you decide whether you’re in scope, here is an overview of MTT and DTT.

Please bear in mind that groups in scope will have UK reporting obligations even if the group does not have a MTT or DTT liability. These obligations will apply to both UK-headed and non-UK headed groups, irrespective of whether the jurisdiction of the ultimate parent entity implements Pillar 2.

6.1 Scope of MTT

A group will be within scope of MTT if these 2 apply:

• it has at least one member in the UK and one member outside the UK
• it meets the revenue threshold test

The revenue threshold test is met if the group has revenue more than €750 million (reduced for periods of less than a year) in any 2 of the four previous periods. The revenue of the group members is taken from the consolidated financial statements of the ultimate parent entity for the period, and so the revenue of all group members – both UK and non-UK – is included in this test.

Special rules apply if there has been a merger or demerger in the tested period or any of the prior four periods. More information can be found in our guidance (MTT11010).

Investment entities and certain excluded entities are not within scope of MTT and DTT. For more information about the types of excluded entities, please refer to our guidance (MTT10010).

6.2 Scope of DTT

A group or UK entity will be within scope of DTT if both of the following apply:

• it has a UK presence
• it meets the revenue threshold test

Groups with only UK members and single UK entities can be in scope, as well as the UK operations of multinational groups. Where the entity is a member of a group, the €750 million revenue threshold test is applied to the group as a whole. As with MTT, the revenue of all group members – both UK and non-UK – is included in this test.

6.3 Compliance obligations

One member of the group must be solely responsible for registering and complying with both the new taxes. This will be the group’s ultimate parent entity, unless you’ve nominated a different UK or non-UK member to be responsible for this.

The filing member must register with HMRC no later than 6 months from the end of the accounting period in which the group became a qualifying group. The information that will need to be provided at registration includes:

• details of the ultimate parent entity
• details of the filing member, if not the ultimate parent entity
• contact details for the individual or tax team responsible for filing the return
• the accounting period start and end dates

The filing member will later be required to submit a Self-Assessment return and an information return to HMRC for each accounting period in which the group qualifies for MTT and/or DTT. If an information return has already been submitted to a qualifying authority outside of the UK, then an overseas return notification can be submitted instead.

7. Publications

You can also find a recording of a meeting that took place on 16 March 2023 which discussed responses to the recent public consultations on the GIR and Tax Certainty for the GloBE Rules.

The UK government has previously undertaken a consultation on Pillar 2 UK implementation and a summary of responses was published on 20 July 2022.

You can see the UK legislation.

HMRC Publishes Draft Legislation to Implement Transitional Country-by-Country Reporting Safe Harbour Anti-Arbitrage Rule

UK HMRC has published a policy paper on draft legislation to implement the transitional Country-by-Country reporting safe harbour anti-arbitrage rule.

General description of the measure

Multinational Top-up Tax and Domestic Top-up Tax are the UK’s adoption of the income inclusion rule and domestic minimum top-up tax rule in the Global Anti-Base Erosion (GloBE) Rules agreed by the UK and other members of the Organisation for Economic Co-operation and Development (OECD) G20 Inclusive Framework on base erosion and profit shifting.

The OECD Inclusive Framework became aware of avoidance transactions that were designed to exploit differences between the tax and accounting rules to allow groups to qualify for the transitional country-by-country reporting safe harbour where they would otherwise not have.

This measure implements an anti-arbitrage rule which protects the UK from a loss of tax. It also ensures that UK legislation remains consistent with OECD administrative guidance on the GloBE rules agreed by the UK and other members of the Inclusive Framework.

OECD

Consults on Draft User Guide for the GloBE Information Return XML Schema

The OECD has launched a public consultation on the Draft User Guide for the GloBE Information Return XML Schema.

Draft User Guide for the GloBE Information Return XML Schema

Background

The Global Anti-Base Erosion (GloBE) Model Rules require the annual filing of a GloBE Information Return (GIR) that provides information on the tax calculations made by an MNE Group under the GloBE Rules.

Recognising the benefits of the consistent implementation of the GIR filing requirements, and following a public consultation process, in July 2023, the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) agreed a standardised GIR template to be relied upon by all implementing jurisdictions, as well as an approach for disseminating the contents of the GIR amongst such implementing jurisdictions.

As part of its work on the facilitation of the implementation of the GloBE Model Rules, and with a view to ensuring a consistent, standardised approach to capturing the GIR information, the Inclusive Framework on BEPS is developing a schema in extensible mark-up language (XML) and a corresponding user guide.

This document therefore contains a draft version of the GIR XML Schema and User Guide, which is designed to both facilitate domestic GIR filings, wherever appropriate, and to be the technical format for exchanging GIR information between tax administrations. This document is being released to the public for the purposes of obtaining input from stakeholders to inform the work towards swiftly finalising the GIR XML Schema and User Guide.

Project description

The GIR User Guide is divided into logical sections based on the GIR XML Schema and provides information on specific data elements and any attributes that describe each data element.

The main sections of the GIR Schema User Guide are:

1. The Message Header with the sender, recipient, message type and Reporting Fiscal Year;
2. The ID and TIN types, used for providing identifying and TIN information in relation to Constituent Entities, JVs, JV Subsidiaries and UPEs.
3. The GloBE Body

The GIR XML Schema is designed to be used for the exchange of information reported under the GIR between competent authorities that have activated exchange relationships under the Multilateral Competent Authority Agreement on the Exchange of GloBE Information Returns (“GIR MCAA”), or another Qualifying Competent Authority Agreement.

Where appropriate, jurisdictions could also consider using the schema domestically for the purpose of gathering the required information from their respective Filing Constituent Entities.

Kazakhstan

Consults on Signing Multilateral Instrument for Pillar 2 Subject to Tax Rule

The Kazakhstan government has published a draft resolution for consultation on the signing of the Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule (STTR MLI). The STTR MLI has been designed to help developing countries protect their tax base and allows for the implementation of the STTR in existing bilateral tax treaties without the need for bilateral negotiations. It includes provisions to allow source jurisdictions to “tax back” where defined categories of intra-group covered income are subject to nominal corporate income tax rates below the STTR minimum rate of 9% and domestic taxing rights over that income have been ceded under a tax treaty. For example, if a payor jurisdiction can impose a 5% withholding tax on a payment of covered income under a treaty and the recipient is subject to a 1% nominal tax rate, the payor jurisdiction retains the 5% withholding tax right and can impose an additional tax under the STTR equal to 3% of the covered income amount (9% – 5% – 1% = 3%). The STTR takes priority over the GloBE Rules (IIR and UTPR) and is creditable as a covered tax under those rules.

Italy

Publishes Implementing Decree for Qualified Domestic Minimum Top-up Tax

Italy’s Ministry of Finance has announced the issuance of the Decree of 1 July 2024, which contains the provisions for implementing the Qualified Domestic Minimum Top-up Tax (QDMTT). The QDMTT was introduced as part of Legislative Decree No. 209 of 27 December 2023, which implemented the Pillar 2 global minimum tax in accordance with Council Directive (EU) 2022/2523 of 14 December 2022. The QDMTT is applied in priority over the Pillar 2 income inclusion rule (IIR) and the undertaxed payment/profit rule (UTPR), also implemented by Legislative Decree No. 209.

The Decree clarifies the meaning of relevant terms, outlines the scope of application and conditions for the QDMTT, details the calculation of the QDMTT and the local accounting standards to be used, covers transitional and safe harbor rules, and establishes rules for the payment of the QDMTT. The Decree also confirms that the QDMTT applies for financial years starting from 31 December 2023.

Gibraltar

2024 Budget Address Delivered Including 15% Corporate Tax Rate and Plans for Pillar 2 Top-up Tax and Income Inclusion Rule

Gibraltar’s Chief Minister Fabian Picardo delivered his 2024 Budget Address on 1 July 2024. The tax measures noted in the address are relatively limited and include confirmation that the corporate tax rate will be increased from 12.5% to 15%. As further detailed in the address from Minister for Justice, Trade and Industry, Nigel Feetham, by moving to a 15% corporate tax rate, Gibraltar is aligning with the OECD minimum corporate tax rate. Minister Feetham also confirmed that work is ongoing for the introduction of a qualifying domestic top-up tax by the end of 2024, with draft legislation expected by September. Further, the government plans to implement the income inclusion rule in 2025.

Vietnam

New Draft Corporate Income Tax Law

Vietnam’s Ministry of Finance has drafted a new Corporate Income Tax Law, which is expected to be submitted to parliament for consultation in October 2024. The final draft is expected to be approved in May 2025 and take effect from 1 January 2026.

Some of the key changes in comparison to the current law include:

• Provisions for the treatment of non-resident entities as taxpayers for corporate income tax purposes when deriving income in Vietnam, including income from the provision of goods and services in the form of e-commerce businesses and digital-based businesses, regardless of their permanent establishment status in Vietnam;
• The introduction of a 2% tax on gross proceeds from the direct transfer of shares by a foreign company, payable by the seller, instead of the current 20% tax on the gain, along with new rules for the same 2% tax payable by the seller on indirect transfers;
• The provision that input VAT that has not been deducted against output VAT and is not eligible for a VAT refund can be counted as deductible expense;
• The addition of new industries to the list of industries eligible for corporate income tax incentives, including:
  • production of digital information content products prioritized for the development and provision of important information services regulated by the government;
  • manufacturing and assembling of cars; and
  • investments in technical facilities to support small and medium-sized enterprises;
• The introduction of a new corporate income tax rates of 15% or 17% for micro and small enterprises, depending on total revenue in the previous year;
• The introduction of new corporate income tax incentives for enterprises in economic zones and high-technology zones; and
• The expansion of the Pillar 2 global minimum tax implementation with provisions for the undertaxed payments/profits rules (UTPR) and provisions for the Subject-to-Tax Rule (STTR) after Vietnam joins the STTR Multilateral Convention (Vietnam has already implemented the Pillar 2 IIR and QDMTT).

Additional details on the new Corporate Income Tax Law will be published once available.

Israel

Planning to Implement Pillar 2 QDMTT in 2026

Israel’s Ministry of Finance has issued a release announcing its plans for the implementation of the Pillar 2 global minimum tax. This includes an initial plan to implement a qualified domestic minimum top-up tax (QDMTT) in 2026 in order to prevent Israeli companies from needing to pay additional tax in foreign countries with respect to income generated in Israel. The Ministry has decided not to implement the income inclusion rule (IIR) and the undertaxed payment/profit rule (UTPR) at this stage. The implementation of the IIR and UTPR will be considered later after the QDMTT is implemented.