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

February 3, 2023

Report on recent US international tax developments 3 February 2023

The Organisation for Economic Co-operation and Development (OECD) on 2 February released a long-awaited package of additional administrative guidance under BEPS 2.0 Pillar Two; the latest package will be incorporated into a revised version of the Commentary to be issued later this year, replacing the original Commentary released in March 2022. The guidance was adopted by the 142-member OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS).

The additional guidance -- together with the December 2022 releases (i.e., safe harbors, penalty relief, information return and tax certainty) -- finalizes the Implementation Framework set out in October 2021. The Executive Summary acknowledges that further guidance will be needed, on an ongoing basis, as countries implement the Pillar Two rules and issues arise after the rules are legislated into their domestic laws. The release explains that the items addressed are those most in need of immediate clarification and simplification.

Among the areas in the new guidance that may be most significant are: (i) the treatment of certain non-refundable tax credits that flow through a tax transparent entity and that arise from an equity method investment, including the low income housing tax credit and many renewable energy tax credit investments; (ii) allocation of taxes arising under the United States (US) global intangible low-taxed income (GILTI) and other blended controlled foreign company (CFC) regimes; and (iii) the design elements for Qualified Domestic Minimum Top-up Taxes (QDMTTs) that will be used for assessment of whether a domestic minimum tax meets the requirements for qualified status, and specific rules relating to the QDMTT.

The guidance sets out minimum standards for the QDMTT and makes clear that the tax base and the rate for QDMTTs can be different than under the rules governing Income Inclusion Rules (IIRs). QDMTTs can deviate from the global anti-base erosion (GloBE) rules but generally must produce a tax rate that equals or exceeds the GloBE’s 15% Minimum Rate. As expected, a QDMTT must exclude tax paid or accrued by domestic Constituent Entities with respect to the income of foreign Constituent Entities under its own CFC or taxable branch regimes. Therefore, GILTI and subpart F taxes cannot be pushed down to impact the effective tax rate in the case of QDMTTs.

The US Treasury praised the release, with a senior Treasury official describing the guidance as providing “certainty for green energy tax incentives, support [for] coordinated outcomes and provide[s] additional clarity that stakeholders have asked for.” A Treasury statement said certainty was also provided on “clear and administrable treatment of taxes paid under the existing U.S. GILTI global minimum tax regime” and refers to a consensus statement by all Inclusive Framework members that Pillar Two “was intentionally designed so that top-up tax imposed in accordance with those rules will be compatible with common tax treaty provisions.”

The OECD Forum on Tax Administration on 1 February 2023 released the “Manual on the Handling of Multilateral Mutual Agreement Procedures and Advance Pricing Agreements.” The manual is meant to act as a “guide to multilateral MAP and APA processes from both a legal and procedural perspective.” The OECD on 24 January also published a package on tax dispute resolution.


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 Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more