The scope is in line with a draft of the rules, which reflect the minimum
tax agreed to in principle by
nearly 140 jurisdictions in October, reported on by Law360 last week.
Countries at that time also agreed on the outlines of an additional so-called
pillar that redistributes some tax revenue of the world's largest corporations.
"The model rules released today are a significant building block in the
development of a two-pillar solution, converting the foundations of a political
agreement reached in October into enforceable rules," said Pascal
Saint-Amans, head of the OECD's Center for Tax Policy and Administration, in a
news release. Guidelines on implementing the reallocation of taxing rights,
known as Pillar One, are expected next year.
The rules for Pillar Two include a 15% minimum effective tax rate on a
country-by-country basis, which is designed to ensure that large multinational
companies can't escape tax regardless of where they do business. The OECD
estimates that the new rules will generate about $150 billion in additional
global tax revenues per year.
The minimum tax rules create a "top-up tax" that would apply to
profits in a jurisdiction when its effective tax rate drops below the 15%
minimum rate. They are due to be transposed into countries' domestic law in
2022 and enter into force in the following year. The European Union is due to present its version of the
minimum tax law Wednesday, which will then likely need to be agreed to
unanimously by all member countries to become law. Other jurisdictions are
expected to introduce similar legislation next year.
The OECD minimum tax rules don't cover all forms of corporate income. They
allow for exclusions, or carveouts, of 5% of the carrying value of assets in a
jurisdiction. These assets include property, plant and equipment as well as
natural resources, leased rights of tangible assets and licenses received from
the government. The carveout doesn't include the value of property that is held
for sale, lease or investment, the document said.
The OECD said it would release commentary on the model rules and address how
they will coexist with the U.S. global intangible low-taxed income rules early
next year. Countries working under the auspices of the OECD are working on a
model for the "subject to tax" rule, which targets intercompany
payments designed to shift profits to low-tax jurisdictions. The OECD plans a
public forum on the implementation of Pillar Two in February and one on the
subject-to-tax rule in March, the news release said.
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