The Global Minimum Tax | Selected Issues on Pillar Two

1. Preliminary Remarks

Within the limits of their sovereignty, it has been internationally accepted that countries have the right to tax their own residents and income from sources in their territorial jurisdictions derived by non-residents as they see fit. Globalization has brought about the internationalization of business and facilitated multinational companies (MNEs) to generate income in different jurisdictions, scaling like never before. The S. 92double taxation on business profits or income resulting from their activities in countries other than their residency often raised obstacles to foreign direct investments (FDI) mitigated by tax treaties. Still, tax treaties allocate taxing rights among the contracting states, usually determining exclusive taxing rights to one of the contracting states (primarily the residence state) or limiting taxing rights to the source state. Ultimately, the residence country must provide an exemption or a credit for the foreign taxes paid, mitigating double taxation, a situation where MNEs exploit every possible way to minimize taxes and maximize profits using complex business structures.

On the one hand, there is a principle of legal certainty and the ...