The Global Minimum Tax | Selected Issues on Pillar Two

S. 3401. Introduction

To address the tax challenges arising from the digitalization of the economy, over 135 Inclusive Framework members joined a two-pillar solution to reform the international taxation rules and to ensure that multinational enterprises pay a fair share of tax wherever they operate and generate profits. Of this solution, the Pillar Two, the main component of which is generally known as the GloBE or global minimum tax introduces a minimum effective tax rate of at least 15%. The concept of GloBE income or loss, which is the foundation stone of the Pillar Two solution, is calculated based on the net financial accounting income (FANIL) of the constituent entities (CEs) of an MNE group adjusted for certain permanent differences (PDs) and certain other items. The list of such items are given in the GloBE Model Rules. One of the primary objectives of the adjustments of PDs and other items is to ensure consistency and fairness in the determination of GloBE income or loss for multinational corporations across various tax jurisdictions. These adjustments try to ensure that the GloBE income or loss is brought as close as possible to the domestic taxable incomes of various tax jurisd...