The OECD released the long-awaited Pillar Two 15% minimum effective tax rate Model Rules on 20 December, just days before the expected release of a draft EU Directive on minimum taxes.
These Model Rules are the first of three expected sets of guidance: the Model Rules; an explanatory Commentary, expected in January; and a more detailed Implementation Framework, expected in the middle of 2022 at the earliest. These Model Rules cover the income inclusion rule (IIR) and undertaxed payments rule (UTPR), collectively referred to as ‘GloBE.’ More detail on the other part of Pillar Two, the subject to tax rule (STTR) will not be made public until 2022. It has been reiterated that the aim is for Pillar Two to be brought into law in 2022, to be effective in 2023, with the UTPR to come into effect in 2024.
Taxpayers now have a clearer outline of the Model Rules – although still with much more detail to be provided next year. What is also clear, however, is how complex the rules will be, and how difficult they will be to comply with.
For more details and a list of PwC contacts, read our Pillar Two explainer and our Tax Policy Alert, which provides an overview of the Pillar Two rules and some of the potential consequences that groups may not necessarily anticipate in the first instance.