The Global Minimum Tax | Selected Issues on Pillar Two

S. 3661. Introduction

In order for a constituent entity (CE) to determine its Global Anti-Base Erosion (GloBE) income from its respective “Financial Accounting Net Income or Net Loss”, adjustments must be made. These adjustments are detailed in Art. 3.2. of the GloBE Rules. One of the adjustments, inter alia, is the exclusion of equity gain or loss (hereafter “equity gain”) which is enshrined in Art. 3.2.1. (c) GloBE Rules. When it comes to taxation, equity gain is one of the most sensitive concerns for companies, especially for multinational entities (MNEs). MNEs have an interest in excluding their equity gains from taxation as do certain jurisdictions seeking to attract foreign investment and avoid double taxation. The tax treatment of equity gains differs from jurisdiction to jurisdiction for a variety of reasons. Some jurisdictions provide relief from taxation by (partially) excluding the equity gains from the tax base of the entity receiving the gain. However, other states do not exclude equity gains from taxation. Additionally, the treatment of equity gains may be different under the GloBE Rules depending on the general accepted accounting principle (GAAP). Hence, an equity gain is ...