The OECD released Administrative Guidance (‘guidance’) on the Pillar Two Global Anti-Base Erosion Rules (GloBE Rules) on 2 February. The guidance was approved by the OECD/G20 Inclusive Framework on BEPS (IF) and is therefore not subject to public consultation. The guidance primarily focuses on (some but not all) previously unaddressed areas under the GloBE Rules.
This guidance addresses a wide range of issues identified by IF members as most in need of immediate clarification and simplification. The guidance will be incorporated into a revised version of the GloBE Commentary and Examples that will be released later this year, replacing the original version issued in March 2022. While the OECD indicated that this guidance represents the ‘final piece of work’ on the GloBE Rules that IF members committed to deliver as part of the GloBE implementation framework, it also stated that the IF will continue to release further guidance on an ongoing basis (i.e., in smaller packages) to ensure that the GloBE Rules continue to be implemented and applied in a coordinated manner. For reference, the OECD previously released guidance related to Safe Harbours and Penalty Relief in December 2022.
Significantly, the guidance confirms the status of the United States’ minimum tax (known as the Global Intangible Low-Taxed Income, or 'GILTI') as a CFC Tax Regime under the GloBE Rules. It also sets out a mechanical allocation formula for GILTI and other ‘Blended CFC Tax Regimes,’ and provides guidance on Qualified Domestic Minimum Top-up Taxes (QDMTT) and the treatment of (some) credits and incentives; all important issues for the business community.
This PwC Alert provides an overview and initial observations on key issues addressed in the guidance.