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Executive summary

On 17 June 2024, the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) released a series of documents on the Pillar One Amount B approach for transfer pricing for certain baseline marketing and distribution transactions and the Pillar Two global minimum tax rules. The two Amount B documents provide current lists of the jurisdictions that are qualified for specified adjustments to the calculations under the Amount B approach and a current list of the jurisdictions that are covered by the political commitment of Inclusive Framework member jurisdictions to respect the outcome of their jurisdictions’ application of Amount B. The two Pillar Two documents consist of an additional agreed Administrative Guidance document and a brief Q&A document providing information on the peer review process for determining the qualified status of the GloBE rules of implementing jurisdictions.

This EY Global Tax Alert covers these documents, including providing an overview of the Administrative Guidance. A more detailed EY Global Tax Alert on the June 2024 Administrative Guidance will be issued shortly.

Detailed discussion

Background

In October 2021, the Organisation for Economic Co-operation and Development (OECD) released a statement reflecting the high-level agreement of Inclusive Framework member jurisdictions on core design elements of Pillars One and Two of the BEPS 2.0 project.¹

As described in the October 2021 statement, Amount B of Pillar One was intended to simplify and streamline the application of the arm's-length principle to in-country baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries. The OECD released public consultation documents on Amount B in December 2022 and July 2023, which reflected the ongoing work on Amount B as well as issues that remained open.² On 19 February 2024, the OECD published a report on Amount B, which is incorporated in the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022.³ That report included a description of additional work continuing in the Inclusive Framework on Amount B, with expected timing for delivery, in the following areas:

• Updated Commentary on Article 25 of the OECD Model Tax Convention, providing specific language relating to tax certainty and the elimination of double taxation that retains optionality in all dispute resolution mechanisms for jurisdictions that do not adopt Amount B, to be released shortly
• Additional optional qualitative scoping criterion that jurisdictions may choose to apply, with any additions to be incorporated into the OECD TP Guidelines, by 31 March 2024
• List of low-capacity jurisdictions, by 31 March 2024
• Competent authority agreements to be used in the context of bilateral tax treaty relationships where Amount B is applied by low-capacity jurisdictions to avoid double taxation, as well as to prevent double non-taxation, to be developed by the Inclusive Framework during 2024
• Framework for gathering information on the practical application of the Amount B approach once it has been in operation for a period of time, to be developed by the Inclusive Framework during 2024
• Further work by the Inclusive Framework on the interdependence between Amount B and Amount A of Pillar One, to be undertaken before the Multilateral Convention for Amount A is signed and enters into force

Since the October 2021 agreement was reached, the Inclusive Framework has released a series of significant agreed documents on the global minimum tax under Pillar Two, including Model Global Anti Base Erosion (GloBE) Rules,⁴ Commentary to the Model GloBE Rules,⁵ guidance on GloBE Safe Harbors,⁶ three packages of GloBE Administrative Guidance,⁷ and a standard template for the GloBE Information Return.⁸ The OECD also released a public consultation document on potential dispute prevention and resolution mechanisms for the GloBE Rules, an area under consideration by the Inclusive Framework but on which consensus has not been reached.⁹ In addition, with respect to the other core element of Pillar Two — the Subject to Tax Rule (STTR) — the OECD has released a model treaty provision and accompanying commentary,¹⁰ as well as documents regarding a multilateral instrument that jurisdictions can use to facilitate implementation of the STTR into their tax treaties.¹¹ In addition, on 25 April 2024, the OECD released the Consolidated Commentary to the Model GloBE Rules, which incorporates the three tranches of Administrative Guidance that were issued before the end of 2023.

Pillar One Amount B documents

On 17 June 2024, the Inclusive Framework released additional guidance on Amount B:

• Statement on the definitions of qualifying jurisdictions within the meaning of sections 5.2 and 5.3 of the Amount B report (Statement on qualifying jurisdictions)
• Statement on the definition of covered jurisdictions for the Inclusive Framework political commitment on Amount B (Statement on covered jurisdictions)

Statement on qualifying jurisdictions

Section 5.2 of the Amount B report provides that, as part of the three-step pricing mechanism, an operating expense cross-check is applied as a guardrail within which the primary return on sales net profit indicator is applied (i.e., cap and collar). The Statement on qualifying jurisdictions notes that this reflects a compromise reached within the Inclusive Framework whereby a second, higher set of operating-expense cap rates, will apply in cases involving “qualifying jurisdictions.”

For purposes of section 5.2, “qualifying jurisdictions” refer to jurisdictions that are classified by the World Bank Group as low income, lower-middle income, and upper-middle income based on the latest available “World Bank Group country classifications by income level.”

Section 5.3 of the Amount B report contains a data-availability mechanism that provides for upward adjustments to the pricing matrix returns in certain circumstances. This is the case when there is no or insufficient data in the global dataset for a particular tested party jurisdiction upon which to validate the appropriateness of the Amount B pricing matrix, coupled with evidence that that jurisdiction could be reasonably considered a “higher risk” jurisdiction. Sovereign credit ratings are used as a proxy to determine “higher risk” jurisdictions and to quantify the applicable adjustment under the mechanism.

For purposes of section 5.3, “qualifying jurisdictions” refer to jurisdictions with (i) a publicly available long-term sovereign credit rating of BBB+ (or equivalent) or lower from a recognized independent credit rating agency, and (ii) fewer than five comparables in the global dataset.

The Statement on qualifying jurisdictions provides separate lists of qualifying jurisdictions for sections 5.2 and 5.3 purposes, respectively. It indicates that these lists, which are to apply prospectively, will be updated and published on the OECD website every five years.

The Statement on qualifying jurisdictions indicates that the lists of qualifying jurisdictions do not imply that these jurisdictions are obligated to adopt, or will adopt, the Amount B approach.

There are 132 jurisdictions included in the list of qualifying jurisdictions for section 5.2 (operating expense cross-check) purposes and 135 jurisdictions included in the list of qualifying jurisdictions for section 5.3 (data-availability mechanism) purposes. Each of the lists includes some jurisdictions that are not included on the other list.

Statement on covered jurisdictions

The Statement on covered jurisdictions notes that, subject to their own domestic legislation and administrative practices, members of the Inclusive Framework have committed to respect the Amount B outcome where it is applied by a covered jurisdiction and to take all reasonable steps to relieve potential double taxation that may arise where there is a bilateral tax treaty in effect between the relevant jurisdictions.

The Statement notes that the term “covered jurisdictions” is used instead of “low-capacity jurisdictions” to avoid suggesting that the jurisdictions covered by the political commitment are necessarily low-capacity and to extend the political commitment to low- and middle-income OECD and G20 jurisdictions that by March 2024 expressed their willingness to apply Amount B.

The Statement provides that criteria for covered jurisdictions are:

• Low- and middle-income Inclusive Framework jurisdictions using the World Bank Group country classifications by income level, excluding European Union (EU), OECD and G20 member countries
• Under an extension approved by the Inclusive Framework, low- and middle-income Inclusive Framework jurisdictions that are OECD and G20 member countries that satisfy the first criterion and by March 2024 expressed to the Inclusive Framework their willingness to apply Amount B to apply Amount B (i.e., Argentina, Brazil, Costa Rica, Mexico, South Africa)
• Any non-Inclusive Framework member that meets the first criterion and expresses to the Inclusive Framework the willingness to apply Amount B, upon request and approval by the Inclusive Framework

The Statement on covered jurisdictions provides an approach to produce a list of covered jurisdictions, which is described as intended to facilitate tax certainty for jurisdictions most interested in implementing Amount B from 1 January 2025. It notes, however, that an expression of interest in applying Amount B does not necessarily mean that a jurisdiction will proceed to implement it.

The list of covered jurisdictions currently includes 66 countries and will be reviewed every five years, with the current period running from 1 January 2025 to 31 December 2029.

The Statement on covered jurisdictions indicates that Inclusive Framework members can extend their political commitment to any other Inclusive Framework or non-Inclusive Framework member on a bilateral basis. It further notes that Inclusive Framework members may choose not to extend their political commitment to additional low- and middle-income countries that are added to the list in the future. It also indicates that some jurisdictions may review their political commitment related to the extension reflected in the current list when the five-year period expires or if such countries are not signatories of the Amount A Multilateral Convention by the end of 2025. It further notes that Turkiye’s political commitment is limited to covered jurisdictions with which there is a bilateral tax treaty in force.

Pillar Two releases

June 2024 Administrative Guidance

This is the fourth tranche of Administrative Guidance approved by the Inclusive Framework, following releases of Administrative Guidance in February 2023, July 2023 and December 2023. The June 2024 Guidance covers:

• DTL recapture
• Divergences between GloBE and accounting carrying values
• Allocation of Cross-border Current Taxes
• Allocation of Cross-border Deferred Taxes
• Allocation of profits and taxes in structures including Flow-through Entities
• Treatment of Securitization Vehicles

DTL Recapture

Chapter 1 of the June 2024 Administrative Guidance provides extensive additional guidance — and examples — with regard to the Deferred Tax Liability (DTL) recapture rule laid out in Article 4.4.4 of the Model Rules. Under the Model Rules, an accrual of a DTL that is claimed in the Adjusted Covered Taxes for a Fiscal Year will be subject to recapture if it does not reverse within the subsequent five Fiscal Years. A DTL subject to recapture would lead to a recomputation of the effective tax rate (ETR) for the year the DTL originated, without considering such accrual. The Model Rules include an exception to this tracking requirement for amounts relating to an Exception Accrual Amount — one of the nine categories laid out in Article 4.4.5 of the Model Rules.

The Model Rules also provide that a multinational enterprise (MNE) may elect to not include in its tax computation a DTL accrual in calculating GloBE ETR. This election is called the Unclaimed Accrual election.

In practice, the DTL recapture rule could become very burdensome for MNE groups required to track such DTL.

Aiming to simplify this exercise, the June 2024 Administrative Guidance provides guidance on the criteria for determining the scope of a DTL category and methodologies for determining whether the DTL accruals in the category have reversed within five Fiscal Years. The guidance also provides methodologies for determining whether the reversal of a DTL is attributable to recaptured DTLs or pre-GloBE DTLs (i.e., DTLs that arose before the Transition Year, which are excluded from the recapture rule).

The June 2024 Administrative Guidance also aims to provide simplification through an extended application of the Unclaimed Accrual election rule in Article 4.4.7. The guidance provides that a Constituent Entity may make an Unclaimed Accrual Five-Year election for a DTL category that it does not expect to prove reversed within five Fiscal Years. The result will be that the Constituent Entity will not claim those DTL accruals in determining its Adjusted Covered Taxes and therefore will not need to determine when the DTLs reverse. For purposes of the DTL recapture rule, a Constituent Entity may track DTLs on an Aggregate DTL Category basis, rather than through item-by-item tracking or based on a single general ledger account.

Finally, the June 2024 Administrative Guidance also extends this guidance to the QDMTT rules — while noting that this could result in a different outcome where QDMTT is computed based on local financial statements rather than the Ultimate Parent Entity’s (UPE’s) Consolidated Financial Statements.

Divergence between GloBE and accounting carrying values

The June 2024 Administrative Guidance describes how MNE Groups should determine Adjusted Covered Taxes of Constituent Entities in cases where the accounting and GloBE carrying values, and the respective deferred tax assets(DTAs)/ deferred tax liabilities (DTLs) determined therefrom, diverge. It also provides guidance regarding the GloBE treatment of intragroup transactions accounted for at cost by the acquiring Constituent Entity, as foreshadowed in the February 2023 Administrative Guidance.

Divergence between the carrying value of assets and liabilities and the underlying deferred tax positions for GloBE and accounting purposes may result from a number of provisions under the Model Rules (e.g., as a result of the requirement to adjust transactions not recorded at arm's length). Where there is a divergence between the GloBE and accounting carrying value of the assets and liabilities of a Constituent Entity, the Total Deferred Tax Adjustment Amount will be determined and subsequently adjusted on the basis of the relevant GloBE carrying value, rather than the accounting value. This implies that if the GloBE carrying value is adjusted to be aligned with the tax carrying value, the related deferred tax expense for accounting purposes will be disregarded for GloBE purposes.

If the GloBE carrying value does not match the local tax carrying value, a DTA or DTL calculated in accordance with the relevant accounting standard but based on the GloBE carrying value, rather than the carrying value, must be used. However, this is not the case where the relevant accounting standard does not allow the recognition of a DTA or DTL on certain transfers (e.g., the Initial Recognition Exemption in IAS12).

The DTAs and DTLs calculated in this manner are recast at a maximum of 15%. Furthermore, the DTL recapture included in Article 4.4.4 of the Model Rules continues to apply in certain circumstances.

The June 2024 Administrative Guidance describes the various situations in which the GloBE carrying values can differ from the accounting carrying values, including as a result of the transition rules in Chapter 9 of the Model Rules.

The June 2024 Guidance indicates that the Inclusive Framework will further consider potential simplification measures to mitigate the compliance burdens associated with divergences between GloBE and accounting carrying values.

Allocation of Cross-border Current Taxes

The Model Rules allocate Covered Taxes of a Main Entity to a Permanent Establishment (PE) with respect to its GloBE income. Where the Main Entity’s domestic tax system blends the income of multiple PEs, a mechanism is required for determining the extent to which the relevant taxes are to be allocated to one PE or another PE. Where the tax system also blends such income with foreign source income of the Main Entity, a mechanism must also determine the extent to which the taxes are accrued with respect to the GloBE Income of PEs and thus are allocable to PEs, as opposed to remaining with the Main Entity.

The general purpose of the allocation mechanism is to match Covered Taxes to the GloBE Income with respect to which they were accrued. In particular, this allocation mechanism applies in the case of current cross-credited taxes that must be allocated between a Main Entity and its PEs or a Parent Entity and its controlled foreign companies (CFCs), Hybrid Entities or Reverse Hybrid Entities when the income of the CFC, Hybrid Entity or Reverse Hybrid Entity is included in the Parent Entity’s taxable income.

In some cases, the current cross-credited taxes may need to be further allocated between a CFC and its PEs, Hybrid Entities or Reverse Hybrid Entities. The mechanism is intended to be sufficiently flexible to accommodate differing treatments of foreign source income under various corporate tax systems and consists of four steps: (1) determine the foreign source income; (2) determine Allocable Covered Taxes: (3) calculate the Cross-Crediting Allocation Key; and (4) allocate to PE (or similar Constituent Entities) and Main Entity (or Parent Entity).

A similar allocation issue arises on including a PE’s loss in the Main Entity’s income under Article 3.4.5 of the Model Rules. The guidance notes that in determining the extent to which the loss of a PE is treated as an expense of the Main Entity, the domestic rules for measuring PE income for which a tax credit s allowed must be taken into account, including whether the loss is first set off against the income of another PE.

Allocation of Cross-border Deferred Taxes

Extension of the Substitute Loss Carry-forward DTA introduction

The February 2023 Administrative Guidance introduced the Substitute Loss Carry-forward DTA, which applies where a Parent Entity has a domestic tax loss in the same year as foreign CFC income against which it is used. The same issues arise both with respect to other Constituent Entities (foreign PEs, Hybrid Entities and Reverse Hybrid Entities) and where the domestic loss of the Main Entity or Parent Entity is carried forward and used against the income of a PE, CFC, Hybrid Entity or Reverse Hybrid Entity in a subsequent year. The June 2024 Administrative Guidance addresses the application of the Substitute Loss Carry-forward DTA in such cases.

Principles for allocating deferred taxes from one Constituent Entity to another Constituent Entity

The Model Rules seek to match Covered Taxes with the relevant GloBE Income. Where one Constituent Entity accrues current taxes in one jurisdiction with respect to GloBE Income earned by a different Constituent Entity located in another jurisdiction, the Model Rules allow for the cross-border allocation of Covered Taxes.

Deferred taxes resulting because of timing differences are also allocated to another jurisdiction where appropriate. Deferred tax expenses or benefits with respect to CFC Tax Regimes can arise for different reasons — for example, because the income of the CFC is recognized for accounting purposes before it is recognized for tax purposes. DTAs may also be the result of the method of recording foreign tax credits (recording on a gross basis with a DTA).

Where a deferred tax expense or benefit arises in the financial accounts of a Parent Entity with respect to a CFC Tax Regime, the deferred tax expense or benefit is allocated to the applicable CFC and recast to 15% if the Parent Entity’s applicable tax rate is higher than 15%. However, the cross-border allocation is subject to the limitation in Article 4.3.3 of the Model Rules on the “push down” of Passive Income. The cross-border allocation of the deferred tax expense or benefit is to occur on a “net basis,” preventing the allocation of a deferred tax expense that will not be paid due to an offsetting foreign tax credit.

The June 2024 Administrative Guidance sets out a five-step process for allocating deferred taxes related to a CFC Tax Regime:

1. Separate the deferred taxes with respect to the assets and liabilities of each CFC Constituent Entity and split them between non-GloBE Income, non-Passive GloBE Income and Passive GloBE Income.
2. Calculate the pre-foreign tax credit deferred tax and Relevant Creditable Foreign Taxes.
3. Allocate the deferred tax with respect to non-GloBE Income to the CFC Constituent Entity, where it will be excluded from Covered Taxes.
4. Allocate the deferred tax with respect to non-Passive GloBE Income to the CFC Constituent Entity, while recasting its pre-foreign tax credit deferred CFC tax liability down to 15%.
5. Allocate the deferred tax with respect to Passive GloBE Income to the CFC Constituent Entity, considering the limit of Article 4.3.3 Model Rules on Passive Income. The excess CFC Taxes remain in the Parent Entity.

The June 2024 Administrative Guidance applies in a similar manner to deferred taxes for PEs (except the limitation on Passive Income) and Hybrid Entities and Reverse Hybrid Entities.

Alternatively, an MNE Group can make a Five-Year Election with respect to the Parent Entity jurisdiction to exclude the allocation of all deferred taxes in relation to PEs, CFCs, Hybrid Entities and distributions arising in that jurisdiction.

The June 2024 Administrative Guidance does not specify the allocation of deferred taxes related to Blended CFC Tax Regimes, such as the US Global Intangible Low-Taxed Income (GILTI) provisions, because of the complexity and inconsistent treatment between accounting standards. It provides that DTAs arising from a Blended CFC Tax Regime are not considered under the transitional rule of Article 9.1.1.

Allocation of profits and taxes in structures including Flow-through Entities

Chapter 5 of the June 2024 Administrative Guidance highlights specific issues that arise in applying the Model Rules to Flow-through Entities and Hybrid Entities, providing guidance on how to address the unique nature of these types of Entities. For Flow-through Entities, income is not taxed at the entity level but rather flows through and is taxed at the owner level. Conversely, for Hybrid Entities, tax liability does not flow through to the owners.

Regarding Flow-through Entities, the June 2024 Administrative Guidance clarifies that the determination of whether an Entity is tax-transparent or a reverse hybrid should generally be based on the tax laws of the closest Constituent Entity owner that is not itself a Flow-through Entity. This determination is made for each Ownership Interest. Consequently, an Entity with multiple owners in different jurisdictions could have more than one classification for GloBE purposes. The Guidance also clarifies that a jurisdiction that does not have a corporate income tax or a similar Covered Tax cannot be considered to treat an Entity created in the jurisdiction or an Entity owned by an Entity created in the jurisdiction as fiscally transparent.

The June 2024 Administrative Guidance also addresses applying the Income Inclusion Rule (IIR) top-up tax calculation under Article 3.5.3 when the UPE or minority owners hold interests indirectly through Flow-through Entities. Additionally, it provides clarity on allocating cross-border taxes under Article 4.3 in structures involving Flow-through Entities, specifying that taxes should first be allocated to the Flow-through Entity before making further allocations.

For Hybrid Entities, the June 2024 Administrative Guidance extends the definition to cover indirect Constituent Entity owners when allocating taxes related to a Hybrid Entity's income. Furthermore, it confirms that the Hybrid Entity definition applies to Entities located in jurisdictions without a corporate income tax, not just tax-transparent entities under domestic laws. The guidance also states that any taxes paid by direct or indirect owners on a Reverse Hybrid Entity's income are allocated to that Reverse Hybrid Entity under Article 4.3.2(d) to ensure appropriate matching with the income to which the tax relates.

Securitization vehicles

Chapter 6 of the June 2024 Administrative Guidance aims to address specific concerns relating to Securitization vehicles. Securitization is a financing technique that enables a creditor (the “originator”) to refinance a set of loans, exposures or receivables, such as residential loans, auto loans or leases, consumer loans, credit cards or trade receivables, by transforming them into tradable securities. This technique requires this portfolio of assets to be isolated from the credit risk of the originator, often by using a special purpose vehicle.

Often, such special purpose vehicles are structured to make negligible profit over their life (after taking into account cash extraction mechanisms). However, depending on the facts and circumstances, a special purpose vehicle may in a specific year record important profit or losses in its Financial Accounting Net Income or Loss, which could trigger Top-up Tax and thus undermine its purpose.

To address this, the June 2024 Administrative Guidance states that the Commentary to the Qualified Domestic Minimum Top-up Tax (QDMTT) and QDMTT Safe Harbour rules will be revised. The revision will allow a QDMTT to exclude a securitization entity from its scope or impose the Top-up Tax liability relating to the securitization vehicle on other Constituent Entities in the jurisdiction without forfeiting the Consistency Standard required for the QDMTT Safe Harbour. The Guidance notes that additional guidance may be issued in the future on this topic.

Qualified status Q&A document

The OECD also released a brief a Question & Answer document that provides information on plans for peer review to determine the qualified status of an implementing jurisdiction’s IIR, UTPR and QDMTT as well as determine the jurisdiction’s eligibility for the QDMTT Safe Harbour. The document indicates that the peer review process will certify the qualified status of the domestic implementation of the GloBE Rules, aimed at ensuring uniform application and consistent administration of the rules. The document further indicates that the process will include a legislative review and ongoing monitoring, managed by the Inclusive Framework, to confirm a jurisdiction's compliance with the GloBE Rules, including the Model Rules, Commentary, and Administrative Guidance.

The Q&A document states that the peer review process will start with a transitional qualification mechanism to allow for swift recognition of the qualified status of implementing jurisdictions' domestic legislation related to the GloBE Rules on a temporary basis. It describes this as a simplified procedure that relies on a self-certification process by each implementing jurisdiction. According to the document, if an implementing jurisdiction submits a self-certification, and no other Inclusive Framework members raise questions or, if questions from Inclusive Framework members are resolved, the jurisdiction's legislation is recorded as having “transitional qualified status.” This transitional status applies from the legislation's effective date until a full legislative review is completed; this review must start no later than two years after the effective date of the legislation.

The document indicates that if the transitional qualified status is lost — for example, due to a full review finding the legislation is not qualified or the legislation is not initiated within the agreed timeframe — this loss will not be retroactive.

According to the document, the Inclusive Framework will publish a list of jurisdictions that have legislation with transitional qualified status on the OECD website, including the start and end dates of applicability. Implementing jurisdictions must recognize other jurisdictions' transitional qualified status based on this published list.

Transitional CbCR Safe Harbour guidance

In connection with the 17 June 2024 release of new Pillar Two documents, the OECD also highlighted the Inclusive Framework’s 27 May 2024 release of additional interpretative CbCR guidance. This document reflects an update to the existing CbCR guidance that is relevant to the Pillar Two Transitional CbCR Safe Harbour.

The changes relate to the treatment of dividends for purposes of “Profit (Loss) before Income Tax,” “Income Tax Accrued (current year)” and “Income Tax Paid (on cash basis).” Prior guidance had already clarified that payments received from other Constituent Entities that are treated as dividends in the payer’s tax jurisdiction should be excluded from Profit (Loss) before Income Tax and that any associated taxes should be excluded from Income Tax Accrued (current year) and Income Tax Paid (on cash basis).

The new addition to the guidance clarifies that in a CbC Report payments between Constituent Entities should be treated consistently in the tax jurisdictions of the payer and the recipient, meaning that a payment is excluded in the recipient’s tax jurisdiction if it is treated as a dividend in the source of data used to complete Table 1 of the CbC Report with respect to the payer’s tax jurisdiction. Conversely, if the payment is treated as something other than a dividend (e.g., interest expense) in the payer’s tax jurisdiction, it should be included in the recipient’s jurisdiction. This rule is in line with Paragraphs 74.16 and 74.17 of the Transitional CbCR Safe Harbour Guidance, as updated in December 2023.

Implications

Amount B is not subject to a revenue threshold (in contrast to both Pillar One Amount A and Pillar Two). It is important that companies assess how the jurisdictions that are relevant to their business choose to react to the implementation of Amount B and how this may impact the pricing of in-scope transactions. Companies should also continue to monitor further developments on Amount B in the Inclusive Framework.

Companies in scope of Pillar Two should review the impact of the changes included in the June 2024 Administrative Guidance to identify all items relevant to the operation of the global minimum tax rules in their circumstances. Companies also should monitor how the jurisdictions where they operate reflect the June 2024 Administrative Guidance and all other agreed Administrative Guidance in their domestic Pillar Two legislation. In addition, it will be important for companies monitor the outcome of the peer review process and the determination of the qualified status of the IIRs and QDMTTs (including QDMTT Safe Harbour status) of all relevant jurisdictions.

A more detailed EY Global Tax Alert on the June 2024 Administrative Guidance will be issued shortly.