The Global Minimum Tax | Selected Issues on Pillar Two

1. Introduction

The emergence of an increasingly globalized and digital economy has presented unique challenges to international taxation. As large multinational enterprises (MNEs) expanded their ability to shift profits and exploit variations in international tax rates, the need for robust regulatory measures became evident. In response, the Organization for Economic Co-operation and Development (OECD) introduced the Pillar Two Model Rules (global anti-base erosion rules (GloBE Model Rules)), a significant step towards addressing these challenges.

S. 292The purpose and object of the GloBE Model Rules is to levy MNEs with a minimum tax rate of 15% upon the “excess profits” arising in each jurisdiction where they operate. For the latter, two conditions must be met. In the first place, the MNE group must earn annual revenues equal to or exceeding EUR 750 million according to the ultimate parent entity (UPE) consolidated financial statement. In the second place, the constituent entity (CE) of the MNE group has to operate in a low-tax jurisdiction, which means that the effective tax rate (ETR) levied in such jurisdiction is below 15%. The difference between 15% and the ETR is the so-called “to...