{"id":14086,"date":"2023-02-03T17:10:50","date_gmt":"2023-02-03T16:10:50","guid":{"rendered":"https:\/\/labre.nl\/?p=14086"},"modified":"2023-02-03T17:32:48","modified_gmt":"2023-02-03T16:32:48","slug":"malta-oecd-sets-out-gilti-tax-allocation-formula-under-globe-rules","status":"publish","type":"post","link":"https:\/\/labre.nl\/en\/2023\/02\/03\/malta-oecd-sets-out-gilti-tax-allocation-formula-under-globe-rules\/","title":{"rendered":"Malta: OECD sets out GILTI tax allocation formula under GLOBE rules"},"content":{"rendered":"\n

\u00a0<\/p>\n

The OECD has published administrative guidance to address several issues arising under a new global minimum tax framework, including the treatment of the US global intangible low-taxed income regime under the rules.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

The\u00a0 <\/span><\/span><\/span><\/span><\/span><\/span>February 2 guidance<\/span><\/span><\/span><\/span><\/span><\/span><\/a> responds to 27 concerns about the framework from countries involved in developing a two-pillar plan to modernize the global corporate tax system for the 21st century. <\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span>All but four of the 142 member jurisdictions of the\u00a0 <\/span><\/span><\/span><\/span><\/span><\/span>inclusive framework<\/span><\/span><\/span><\/span><\/span><\/span><\/a> on base erosion and profit shifting\u00a0 <\/span><\/span><\/span><\/span><\/span><\/span>have agreed<\/span><\/span><\/span><\/span><\/span><\/span><\/a> to implement the plan, which follows up on\u00a0 <\/span><\/span><\/span><\/span><\/span><\/span>action 1<\/span><\/span><\/span><\/span><\/span><\/span><\/a> of the <\/span><\/span><\/span><\/span><\/span><\/span>BEPS project<\/span><\/span><\/span><\/span><\/span><\/span><\/a> .<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

Pillar 2<\/span><\/span><\/span><\/span><\/span><\/span><\/a> \u00a0would ensure that large multinational enterprises pay a minimum level of corporation tax in all jurisdictions in which they operate, primarily through the global anti-base erosion (GLOBE) rules. <\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span>The\u00a0 <\/span><\/span><\/span><\/span><\/span><\/span>main features<\/span><\/span><\/span><\/span><\/span><\/span><\/a> of the GLOBE rules are the IIR and the UTPR, formerly known as the income inclusion rule and undertaxed payments rule, although some countries call the latter the undertaxed profits rule.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

The GLOBE rules establish a system of top-up taxes that are calculated and applied on a jurisdictional basis. <\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span>Under the regime, an in-scope MNE must pay a top-up tax to bring its effective tax rate on the income in those jurisdictions up to <\/span><\/span><\/span><\/span><\/span><\/span>15 percent<\/span><\/span><\/span><\/span><\/span><\/span><\/a> , after accounting for a substance-based carveout.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

The IIR takes priority over the UTPR and charges the top-up tax attributed to an entity using a top-down approach, applying to the ultimate parent entity if it is based in a jurisdiction that has adopted an IIR, then applying down the ownership chain . <\/span><\/span><\/span><\/span><\/span>But if a jurisdiction has adopted a qualified <\/span><\/span><\/span><\/span>domestic minimum tax<\/span><\/span><\/span><\/span><\/a> , then that takes priority over the IIR.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

The OECD\u00a0 <\/span><\/span><\/span><\/span>published<\/span><\/span><\/span><\/span><\/a> model GLOBE rules in December 2021 and\u00a0 <\/span><\/span><\/span><\/span>related commentary<\/span><\/span><\/span><\/span><\/a> in March 2022. The GILTI regime had inspired the IIR’s design, but needed reforms to be a compliant, or qualified, IIR. <\/span><\/span><\/span><\/span><\/span>The Biden administration had <\/span><\/span><\/span><\/span>tried and failed<\/span><\/span><\/span><\/span><\/a> to pass those reforms in the Build Back Better Act ( <\/span><\/span><\/span><\/span>HR 5376<\/span><\/span><\/span><\/span><\/a> ) which had called for applying GILTI rules on a jurisdictional, rather than worldwide, basis. <\/span><\/span><\/span><\/span><\/span>As a result, stakeholders were left uncertain how the GILTI regime would co-exist with the new rules.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

The administrative guidance confirms that all countries adopting the GLOBE rules would treat the GILTI system as a \u201cblended controlled foreign corporation tax regime.\u201d <\/span><\/span><\/span><\/span><\/span>As a result, in-scope US MNEs would have to account for their worldwide GILTI taxes when calculating their effective tax rates in the jurisdictions where they have operations but would need a method to allocate those taxes to individual jurisdictions.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

To that end, the administrative guidance provides a mechanical allocation formula, which is a major achievement in coordinating the GLOBE system with the GILTI regime, according to US Treasury officials. <\/span><\/span><\/span><\/span><\/span>The approach will cut compliance costs and disputes while also mitigating double taxation risks, the officials added.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

The guidance provides that the formulaic allocation key will apply for 2024 and 2025 and will be reassessed after that. <\/span><\/span><\/span><\/span><\/span><\/span><\/span>The timing syncs with a scheduled GILTI tax rate increase at the end of 2025.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

In addition to the treatment of GILTI taxes under the rules, the guidance clarifies that low-income housing and renewable energy tax credits, including those in the Inflation Reduction Act,\u00a0 <\/span><\/span><\/span><\/span>will be protected<\/span><\/span><\/span><\/span><\/a> for noncontrolled partnerships. <\/span><\/span><\/span><\/span><\/span><\/span><\/span>It also sets out the hallmarks of a qualified domestic minimum top-up tax, if countries decide to pursue one.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

The OECD plans to publish a revised commentary document later in 2023 containing the administrative guidance, replacing the March 2022 commentary.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

\u00a0<\/p>\n

For further information, please contact:<\/span><\/span><\/em><\/strong><\/p>\n

Silvio Cilia<\/span><\/span><\/span> , Lawyer<\/span><\/span><\/p>\n

Corrieri Cilia, Birkirkara<\/span><\/span><\/span><\/span><\/p>\n

Email: silvio@corriericilia.com<\/span><\/span><\/span><\/span><\/span><\/p>\n

t: +356 2017 3204<\/span><\/span><\/span><\/span><\/p>\n

\u00a0<\/p>\n

#WLNadvocate #Malta #Europe #taxlaw #tax #law #legal #lawfirm #lawyer #corporatelaw #finance #network #article<\/span><\/span><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

\u00a0 The OECD has published administrative guidance to address several issues arising under a new global minimum tax framework, including the treatment of the US global intangible low-taxed income regime under the rules. The\u00a0 February 2 guidance responds to 27 concerns about the framework from countries involved in developing a two-pillar plan to modernize the…<\/p>\n","protected":false},"author":3,"featured_media":14088,"comment_status":"close","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[48],"tags":[],"ppma_author":[68],"class_list":["post-14086","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-warwick-legal-network-2"],"acf":[],"authors":[{"term_id":68,"user_id":3,"is_guest":0,"slug":"tara","display_name":"Tara Bruijn","avatar_url":"https:\/\/labre.nl\/wp-content\/uploads\/cropped-Tara-Profile-96x96.jpeg","author_category":"","first_name":"Tara","last_name":"Bruijn","user_url":"https:\/\/labre.nl","job_title":"","description":"Voor meer informatie of vragen over het bovenstaande kunt u contact opnemen met Tara Bruijn van het secretariaat."}],"_links":{"self":[{"href":"https:\/\/labre.nl\/en\/wp-json\/wp\/v2\/posts\/14086","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/labre.nl\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/labre.nl\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/labre.nl\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/labre.nl\/en\/wp-json\/wp\/v2\/comments?post=14086"}],"version-history":[{"count":0,"href":"https:\/\/labre.nl\/en\/wp-json\/wp\/v2\/posts\/14086\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/labre.nl\/en\/wp-json\/wp\/v2\/media\/14088"}],"wp:attachment":[{"href":"https:\/\/labre.nl\/en\/wp-json\/wp\/v2\/media?parent=14086"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/labre.nl\/en\/wp-json\/wp\/v2\/categories?post=14086"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/labre.nl\/en\/wp-json\/wp\/v2\/tags?post=14086"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/labre.nl\/en\/wp-json\/wp\/v2\/ppma_author?post=14086"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}