- Multinationals with revenues of at least €750 million will pay a minimum effective tax rate of 15% on a country-by-country basis.
- Global minimum tax model rules were published in December 2021, and further commentary and other administrative guidance has subsequently been published by the OECD Inclusive Framework.
- Safe harbours are available, including a three-year transitional safe harbour based on a company’s country-by-country (CbC) report and/or financial statements and a permanent safe harbour based on effective tax rates.
- A ‘side-by-side system’ has been agreed, which will allow the US tax regime to sit alongside Pillar Two.
- The OECD Inclusive Framework has published a standardised information return, including transitional simplified jurisdictional reporting for the first five years.
- Separately, a treaty-based gross level ‘subject to tax rule’ is available for developing countries to include in their treaties – applies to a wide scope of intra-group payments if income is subject to tax at a nominal tax rate below 9%.
- Timing: in the UK an income inclusion rule and a qualified domestic minimum top-up tax apply for accounting periods beginning on or after 31 December 2023. The undertaxed profits rule applies in the UK for accounting periods beginning on or after 31 December 2024. Measures to implement the side-by-side agreement with the US in UK legislation will be subject to technical consultation and then brought forward in the next Finance Bill, to be applied for accounting periods beginning on or after 1 January 2026.
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