Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

February 25, 2022
2022-5209

Report on recent US international tax developments – 25 February 2022

The G20 Finance Ministers and Central Bank Governors recently re-endorsed the previously announced ambitious Base Erosion and Profit Shifting (BEPS) 2.0 timeline, including having a final multilateral instrument, model rules for inclusion in domestic legislation, and a commentary completed by the middle of 2022. To meet this deadline, the Organisation for Economic Co-operation and Development (OECD) has released initial blocks of these rules as drafts for consultation purposes along with very quick turnaround deadlines for comments.

During a Tax Talks webinar on 21 February, OECD officials discussed plans for future releases, but conceded that stakeholders have become increasingly frustrated with the rush to develop these rules. One official said, “we are trying to address them … with as much engagement as is possible within the overall timelines that we have.”

BEPS 2.0 drafts have been released on nexus and revenue sourcing and tax base determinations for Amount A, and an OECD official said it is expected that other blocks of Pillar One will be released on a rolling basis once the scoping rules are “stabilized.”

OECD officials also provided an overview of the Pillar Two global minimum tax rules (or GloBE rules) that confirmed the basics of the rule – a 15% jurisdictional effective rate, assessed generally on a top-down approach. However, the ordering for the qualified domestic minimum tax (QDMT), newly released in the December 2020 Model Rules, was highlighted as a provision that would be applied first in determining the appropriate jurisdiction to which any top-up tax would be owed. Thus, if a jurisdiction adopts a QDMT, it will have the first right to collect tax, while a jurisdiction that adopts the income inclusion rule will have the right to collect tax (on a top-down basis) only when there is not a QDMT in a local jurisdiction. The undertaxed payments rule (UTPR) was identified as the third and last step in determining the jurisdiction to which tax could be owed but was not discussed.

An official also presented a Pillar Two timeline, saying the OECD is adding the finishing touches to the commentary and that it is expected to be released shortly. It appears that once the commentary is released, the OECD will turn to meet their goal of a February/March public consultation on implementation, with rules that are intended to deliver intended outcomes with a sensible compliance burden, including safe harbors and simplified tax administration processes.

On the subject to tax rule (STTR), an OECD official presented the work streams as: (i) an STTR model treaty provision; (ii) a commentary; (iii) the process to assist in implementing; and (iv) a multilateral instrument. He said the OECD is developing a new multilateral instrument to facilitate implementation of the STTR in affected tax treaties, which is envisioned to be similar to the BEPS Multilateral Instrument and will modify the application of existing treaties to give effect to the rule. As identified in the October 2021 Inclusive Framework agreement, the STTR will apply to royalties, interest and other payments that remain under discussion.

In other OECD news, an official was quoted as saying the organization is finalizing a tax reporting framework for cryptoassets. The official said, “The goal of the OECD work is to design a tax reporting exchange framework that will allow tax administrations to obtain and then automatically exchange the relevant information, which is needed to address tax compliance risks … .” The OECD will publish the framework plan, reportedly including proposed revisions to the common reporting standard, in March 2022.

_________________________________________

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

 


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


Yes, I accept         Find out more