The rapid digitalisation and globalisation of the economy have created complex challenges for international tax systems. In response, the OECD/G20 Inclusive Framework on BEPS (Base Erosion and Profit Shifting) has developed the Global Anti-Base Erosion (GloBE) Model Rules—a coordinated approach aimed at ensuring multinational enterprises (MNEs) pay a fair share of tax, regardless of where they operate.
At the heart of the GloBE Rules are
two key mechanisms: the Income Inclusion Rule (IIR) and the Undertaxed
Profits Rule (UTPR). These apply a Top-up Tax to ensure that MNEs
pay at least a minimum level of tax (15%) on income earned in each
jurisdiction. Rather than acting as traditional corporate income taxes, these
rules work more like an international alternative minimum tax.
The rules apply to MNEs with
consolidated revenues of at least EUR 750 million and are designed to be
implemented consistently across jurisdictions under a common approach,
promoting transparency and preventing double taxation.
Key elements of the framework
include:
- Scope
and Thresholds:
Only large MNEs with global operations are covered. Smaller or purely
domestic groups are excluded.
- Income
and Tax Computation: GloBE income is derived from financial statements, adjusted for tax
differences. Effective Tax Rates (ETRs) are calculated on a jurisdictional
basis.
- Currency
and Compliance:
Rules account for currency fluctuations and allow for transitional and
administrative simplifications through safe harbours and coordination
mechanisms.
- Transition
and Implementation: Jurisdictions are encouraged to align their domestic laws with the
model rules to ensure global coherence.
This initiative reflects a
significant step toward global tax fairness, curbing the long-standing issue of
profit shifting to low-tax jurisdictions and modernising tax systems for the
digital age.
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