Multinationals should pay close attention to various ‘traps’ on the operation of the pillar two model rules which might generate a tax charge when none was expected. The operation of deferred tax provisions can lead to the absurdity of a negative marginal tax rate whereby the lower a multinational’s profits the higher the top-up tax due (and vice versa). Another potential trap arises from the application of accounting principles on the transfer of assets among multinationals’ constituent entities especially as a consequence of stock acquisitions. A further trap is caused by domestic tax incentives such as the UK’s patent box regime which can cause the effective tax rate to fall below 15% and as a consequence risks undermining such incentives unless the territory in question modifies them to become qualified refundable tax credits. The OECD needs to reach agreement on how to resolve these practical...
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Multinationals should pay close attention to various ‘traps’ on the operation of the pillar two model rules which might generate a tax charge when none was expected. The operation of deferred tax provisions can lead to the absurdity of a negative marginal tax rate whereby the lower a multinational’s profits the higher the top-up tax due (and vice versa). Another potential trap arises from the application of accounting principles on the transfer of assets among multinationals’ constituent entities especially as a consequence of stock acquisitions. A further trap is caused by domestic tax incentives such as the UK’s patent box regime which can cause the effective tax rate to fall below 15% and as a consequence risks undermining such incentives unless the territory in question modifies them to become qualified refundable tax credits. The OECD needs to reach agreement on how to resolve these practical...
If you are not a subscriber, subscribe now to read this content.
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