OECD publishes additional guidance on global minimum tax

Part of the OECD/G20 Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, the additional guidance focuses on the Global Anti-Base Erosion Model (GloBE) rules – a key component of Pillar Two – which intend to ensure that large MNEs pay a minimum level of tax on the income arising in each of the jurisdictions where they operate.

Included in the additional guidance is administrative guidance (144-page / 3MB PDF) containing procedures allowing multinational enterprises to aggregate categories of deferred tax liabilities to help determine whether the GloBE ‘recapture rule’ will apply. It also clarifies how deferred tax assets and liabilities are determined under GloBE rules, and how cross-border current and deferred taxes and the profits and taxes on certain flow-through tax structures should be allocated.

In addition, the Inclusive Framework has recently released Country-by-Country Reporting (CbCR) Safe Harbour guidance, intended to further clarify previously published interpretative CbCR guidance (30-page / 460KB PDF).

Also included in the latest updates from the Inclusive Framework is an agreed approach by Inclusive Framework members in the form of a question and answer document (6-page / 542KB PDF) towards recognising which jurisdictions have ‘qualified’ rules under the global minimum tax.

Robert Dever, a tax law expert at Pinsent Masons, said: “The additional guidance which seeks to provide consistency and simplification in relation to several aspects of the GloBE rules should be welcomed by affected taxpayers and their advisors.”

He noted that the Irish law which transposed the EU Minimum Tax Directive – which seeks to ensure that the GloBE rules of Pillar Two are implemented by EU member states in a coordinated manner – into the Irish tax code last year, referenced the previous guidance issued by the Inclusive Framework.

As the latest guidance will need to be adopted through ministerial order in Ireland, outcomes from the guidance should only be followed by companies based in Ireland to the extent that those outcomes are consistent with the EU Minimum Tax Directive, he said.

“Separate guidance is expected from the Irish Revenue Commissioners in relation to the qualified domestic minimum top-up tax, safe harbours and administrative provisions, as well as other aspects of the EU Minimum Directive transposed into Irish law with effect from 1 January 2024,” he added.