Pillar-II Model Rules for Global Minimum Tax
- December 21, 2021
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Pillar-II Model Rules for Global Minimum Tax
Subject – IR
Context – OECD releases Pillar-II model rules for domestic implementation of 15% global minimum tax
Concept –
- The Organisation for Economic Co-operation and Development (OECD) published detailed rules to assist in the implementation of new international tax system, which will ensure multinational enterprises (MNEs) will be subject to a minimum 15 per cent tax rate from 2023.
- India is one among 137 countries that are signatory to new global tax regime.
- They are drafted as model rules that provide a template that jurisdictions can translate into domestic law, which should assist them in implementing Pillar Two within the agreed time frame and in a co-ordinated manner.
- The rules define the scope and set out the mechanism for the Global Anti-Base Erosion (GloBE) Rules under Pillar Two. These will assist countries to bring the GloBE rules into domestic legislation in 2022.
- The minimum tax will apply to MNEs with revenue above €750 million and is estimated to generate around $150 billion in additional global tax revenues annually.
- The model rules have kept the primary scope same as annual revenue of € 750 million for constituent entities that are members of an MNE Group with exclusions for a governmental entity, an international organisation, a non-profit organisation, a pension fund, an investment fund that is an ultimate parent entity, and a real estate investment vehicle that is an ultimate parent entity etc.
- The term ‘Permanent establishment’ has been defined as well under the model rules.
To know more about Global minimum tax, please refer June 2021 DPN.
To know about Pillar-1 and Pillar-2, please refer September 2021 DPN.