The Global Minimum Tax | Selected Issues on Pillar Two

S. 4601. Introduction

The GloBE Model Rules intend to ensure a level playing field by achieving a minimum level of taxation for in-scope MNEs. In the model rules, the measure of this minimum level is given by the effective tax rate (ETR) that an MNE pays within a jurisdiction compared to the minimum rate that has been set at 15% by policymakers.

The ETR constitutes the central element of the GloBE Model Rules. An ETR below the minimum rate for a jurisdiction in a given fiscal year triggers the GloBE rules, initiating the calculation of top-up tax for the IIR and UTPR where the ETR also determines the top-up tax rate by computing the difference between the jurisdictional ETR and the 15% minimum rate. The design of the ETR computation has a significant impact on the effectiveness of the global minimum tax, prompting the OECD to incorporate mechanisms in the model rules ensuring a reliable and consistent measure of effective tax liability to safeguard the integrity of the GloBE. Section 2. of the chapter provides an overview of the main characteristics and policy choices around the ETR computation within the GloBE Model Rules.

This process entails calculating GloBE income or loss for each cons...