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Canada released draft legislation on 4 August to implement the Pillar Two global minimum tax regime developed by the OECD/G-20 Inclusive Framework on Base Erosion and Profit Shifting. This regime generally would apply to multinational groups (MNE groups) with consolidated revenue of at least €750 million.

Canada has released its draft Pillar Two implementing legislation as a new act, called the Global Minimum Tax Act (GMTA). The GMTA generally is aligned with the model rules and OECD commentary. To ensure consistency, the GMTA includes a provision stating that this legislation is to be interpreted consistently with the model rules, the OECD commentary and future guidance released by the OECD. However, the structure and drafting of the GMTA differs from the model rules in many respects.

The draft legislation confirms that the Canadian Income Inclusion Rule (IIR) and Domestic Minimum Top-up-Tax (DMTT) would apply for fiscal years of MNE groups beginning after 30 December 2023. Since this implementation date is fast approaching, MNE groups should act now to analyze the potential impact of the GMTA, and to consider whether their current data, systems, technology, and processes can support the requirements of the draft legislation. Interested parties also should consider submitting comments to the Department of Finance by the 29 September 2023, deadline.