OECD Proposals for a New Global Tax Framework

The OECD Inclusive Framework has reached a majority agreement from 130 out of 139 member jurisdictions, including Jersey, on proposals for a new global tax framework. This is an important stepping-stone in the OECD process to agree new rules for the taxation of the world’s largest multi-national companies. 

The proposals are targeted and limited in scope, focussing on the world’s largest companies and if agreed: 

  • Pillar One of the package would create new profit allocation rules for the world’s largest 100 global Multi-National Companies (MNCs), excluding extractives and regulated financial services. For that small, targeted group of MNCs, certain of their profits would be re-allocated to market jurisdictions; and
  • Pillar Two would introduce a new framework of taxation whereby companies that are in scope would pay a Minimum Effective Rate of taxation, calculated in a specific way according to the Pillar Two rules and on a country-by-country basis.  The level of the Minimum Effective Rate contained in the building blocks is “at least 15%”.

The proposals also recognise that funds should not be in scope of Pillar Two and there is an exclusion for regulated financial services from Pillar One. Investment funds that are ultimate parent entities of an MNC Group or any holding vehicles used by such entities, organisations or funds will not be subject to the Pillar Two rules.

The agreement from this OECD Inclusive Framework meeting will be sent for political endorsement to the G20 meeting of Finance Ministers in Venice 9 - 10 July 2021. Assuming this endorsement is given, the OECD aims to hold a further Inclusive Framework meeting in October 2021, in advance of the G20 Leaders’ Summit scheduled for 30/31 October. The OECD intends to announce details of a final detailed package of Pillar One and Pillar Two measures at that stage.

For more information on how the OECD Proposals for a New Global Tax Framework may impact your business please get in touch with members of our Tax team, Rob Brown and Mark Harman.

For further information please download our publication.