The Global Minimum Tax | Selected Issues on Pillar Two

S. 1161. Introduction

The Global Anti-Base Erosion Model Rules (GloBE Rules) have prompted a significant amount of paperwork due to their excessive complexity. Such a perspective has been underscored by the countless documents released by the Inclusive Framework (IF) on the Base Erosion and Profit Shifting Project (BEPS) in addition to the GloBE Rules. In this scenario, a substantial part of the complexity of the GloBE Rules lies in the application of its technical provisions such as the calculation of the jurisdictional effective tax rate (ETR).

The jurisdictional ETR is an inherent element in the imposition of the “Top-up Tax” as it is only triggered by means of the income inclusion rule (IIR), undertaxed payment rule (UTPR), or qualified domestic minimum top-up tax (QDMTT) when a multinational enterprise (MNE) is subjected to a jurisdictional ETR below the minimum rate. In turn, a fundamental aspect of calculating the ETR is determining the extent to which high and low-tax income from various constituent entities (CE) of an MNE are allowed to be blended when setting its basis. Thus, as a core element, the OECD meticulously discussed the subject throughout the development of the technica...