Responding to the OECD consultation on draft model rules for Amount A, the CIOT welcomes the revised implementation schedule and, given the complexity of the rules, suggests a review mechanism to allow for future changes. The response highlights a number of interesting points:
A significant amount of work is still required to finalise the model rules and to then develop the multilateral convention (MLC) to implement Amount A; the revised schedule for Pillar One is therefore welcome.
Recognising the complexity of the model rules, and likelihood of anomalies and unforeseen practical difficulties that often arise with new legislation, the MLC to implement Amount A should include a mechanism to trigger a review of the rules and allow for amendment if necessary.
In the meantime, ongoing work should continue to focus on the practicalities of the model rules and ensure that these are as practicable and straightforward as possible, while delivering the underlying policy aims.
Mechanisms in the draft rules to simplify the position for MNEs are particularly welcome, including a three-year transition period allowing the use of simplified revenue sourcing rules.
In terms of revenue sourcing, a transitional ‘soft landing’ period during which an MNE’s calculations would be accepted would be helpful in the final version of the rules.
Commentary and guidance on the rules should be as detailed as possible, with multiple examples, to help MNEs and tax authorities apply the rules.
Effective double taxation relief will be critical, covering both the residence jurisdiction and market jurisdiction, given that Pillar One is all about reallocation of profits to market jurisdictions.
The MLC will not only require the withdrawal of existing unilateral digital services taxes, but will include a ‘definitive list’ of existing measures that are to be withdrawn.
The CIOT also notes that draft model rules for the administration of the new taxing right, including tax certainty provisions, are expected to be released before the Inclusive Framework meeting in October 2022.
Responding to the OECD consultation on draft model rules for Amount A, the CIOT welcomes the revised implementation schedule and, given the complexity of the rules, suggests a review mechanism to allow for future changes. The response highlights a number of interesting points:
A significant amount of work is still required to finalise the model rules and to then develop the multilateral convention (MLC) to implement Amount A; the revised schedule for Pillar One is therefore welcome.
Recognising the complexity of the model rules, and likelihood of anomalies and unforeseen practical difficulties that often arise with new legislation, the MLC to implement Amount A should include a mechanism to trigger a review of the rules and allow for amendment if necessary.
In the meantime, ongoing work should continue to focus on the practicalities of the model rules and ensure that these are as practicable and straightforward as possible, while delivering the underlying policy aims.
Mechanisms in the draft rules to simplify the position for MNEs are particularly welcome, including a three-year transition period allowing the use of simplified revenue sourcing rules.
In terms of revenue sourcing, a transitional ‘soft landing’ period during which an MNE’s calculations would be accepted would be helpful in the final version of the rules.
Commentary and guidance on the rules should be as detailed as possible, with multiple examples, to help MNEs and tax authorities apply the rules.
Effective double taxation relief will be critical, covering both the residence jurisdiction and market jurisdiction, given that Pillar One is all about reallocation of profits to market jurisdictions.
The MLC will not only require the withdrawal of existing unilateral digital services taxes, but will include a ‘definitive list’ of existing measures that are to be withdrawn.
The CIOT also notes that draft model rules for the administration of the new taxing right, including tax certainty provisions, are expected to be released before the Inclusive Framework meeting in October 2022.
