OECD releases Global Anti-Base Erosion Rules for implementation of 15% global minimum tax

News, dated 20-12-2021

The OECD has released Global Anti-Base Erosion Rules (GloBE) to assist in implementing a landmark reform to the international tax system, which will ensure Multinational Enterprises (MNEs) will be subject to a minimum of 15% tax rate from 2023.

GloBE aims to provide a precise template to Governments for taking forward the two-pillar solution to address the tax challenges arising from digitalisation agreed in October 2021 by 137 countries and jurisdictions.

The rule defines the scope and sets out the mechanism under Pillar Two, introducing a global minimum corporate tax rate set at 15%. The minimum tax will apply to MNEs with revenue above EUR 750 million and is estimated to generate around USD 150 billion in additional global tax revenues annually.

The GloBE rules will provide for a coordinated system of taxation intended to ensure large MNE groups pay the minimum level of tax on income arising in each of the jurisdictions in which they operate. The rules create a “top-up tax” to be applied on profits in any jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below the minimum 15% rate.

In early 2022, the OECD will release the Commentary relating to the model rules and address co-existence with the US Global Intangible Low-Taxed Income (GILTI) rules.

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