The Global Minimum Tax | Selected Issues on Pillar Two

1. Introduction

The international tax landscape is likely to be profoundly changed by the Model Global Anti-Base Erosion Rules (‘GloBE’) under Pillar Two. As a key part of the policies to address the tax challenges of the digitalization of the economy, the Organisation for the Economic Co-operation and Development (‘OECD’) and Inclusive Framework (‘IF’) on Base Erosion and Profit Shifting (‘BEPS’) envisaged the Pillar Two model rules as a tool to ensure that multinational enterprises pay a minimum effective corporate tax on their profits in each jurisdiction in which they operate. A top-up tax will be imposed in respect of the income of a constituent entity whenever the constituent entity is taxed under the minimum effective tax rate (‘ETR’) of 15%.

The right to raise the taxation level goes first to the jurisdiction of the constituent entity. During the development of the works of Pillar Two, the OECD/G20 introduced a complementary rule for a qualified domestic top-up tax (‘QDMTT’) that S. 28takes precedence over the GloBE rules originally envisaged. Only if no QDMTT is applicable under the jurisdiction of the constituent entities can other entities within a MNE group be deemed responsib...