Most of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting’s (the Inclusive Frameworks) 139 member countries have agreed on the two-pillar plan to reform international taxation rules, re-distributing rights to tax profits earned by the largest multinational groups and setting a minimum corporate income tax rate of 15 per cent.

The provisional agreement is similar to that reached by finance ministers of the G7 countries last month. It is now endorsed by the G20 group of countries and by 130 countries and jurisdictions in the Inclusive Framework. This consensus group represents more than 90 per cent of global GDP, according to Director of the OECD Centre for Tax Policy and Administration Pascal Saint-Amans.

The agreement consists of two pillars. Pillar One re-allocates some taxing rights over multinational enterprises (MNEs) from their home countries to the markets where they have business activities and earn profits, regardless of whether the MNEs have a physical presence there. It will apply to MNEs with global turnover above EUR20 billion and profitability above 10 per cent. Regulated financial services are excluded.

Pillar Two seeks to put a floor on competition over corporate income tax, through the introduction of a 15 per cent global minimum corporate tax rate. The minimum tax rules would apply to multinational enterprises with global revenue above EUR750 million, allowing jurisdictions to impose a ‘top-up’ tax on a parent entity related to income incurred by a subsidiary in a low-tax jurisdiction or to refuse any associated tax deductions. There is an extra exclusion for at least 5 per cent of the value of multinationals’ tangible assets and salary costs...

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