On June 17, 2024, the OECD published additional guidance on Amount B of Pillar One package to address digital economy taxation.
Amount B of Pillar One provides a simplified and streamlined approach to the application of the arm’s length principle to baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries. A report on Amount B was published in February.
The June 17 additional guidance includes the definitions of qualifying jurisdictions within the meaning of section 5.2 and 5.3 of the Amount B guidance, and the definition of covered jurisdictions within scope of the political commitment on Amount B.
Last month, the OECD revealed that the Inclusive Framework on BEPS is nearing completion of the negotiations on a final package on Pillar One (which includes a text of the Multilateral Convention for Amount A and a framework for Amount B) with the goal of reaching a final agreement in time to open the MLC for signature by the end of June.
Meanwhile, the Inclusive Framework also released further guidance clarifying and simplifying the application of the global minimum tax and an overview of the streamlined process for recognizing qualified status for the legislation of jurisdictions implementing the Global Anti-Base Erosion (GloBE) Rules.
Specifically, the Inclusive Framework has released agreed administrative guidance on a number of key topics where consistency and simplifications were sought by Inclusive Framework members and stakeholders.
The guidance sets out simplified procedures that will allow MNE Groups to aggregate various categories of deferred tax liabilities for determining whether they have reversed within five year and therefore do not need to be recaptured.
The administrative guidance clarifies the methodology used to determine deferred tax assets and liabilities for GloBE purposes and further guidance on the allocation of cross-border current and deferred taxes and the profits and taxes on certain flow-through tax structures.
Finally, the guidance provides specific guidance on the treatment of securitisation vehicles under a jurisdiction’s domestic minimum top-up tax that will prevent these vehicles giving rise to volatile outcomes under the GloBE Rules.