MHA | G-7 The Two-Pillar Solution

G-7 The Two-Pillar Solution

Chris Danes · May 29th 2023 · read

G 7

Welcomes Progress in `Two-Pillar Solution' Implementation, Seeks More Pillar Two Guidance

In a joint communiqué of 13 May 2023, G-7 countries emphasised their "strong political commitment towards the swift global implementation of the OECD/G20 Inclusive Framework (IF) Two-Pillar Solution". The document issued under the Japanese G-7 presidency also concerned the progress in the implementation of the Pillars.

In terms of Pillar One, the communiqué the G-7 ministers and central bank governors noted "significant progress in the negotiation of the Pillar 1 Multilateral Convention (MLC)" and reaffirmed their "commitment to the swift completion of the negotiation so that the MLC can be ready for signature within the agreed timeline". The referred timeline should be the end of July, according to Manal Corwin, the Director of the OECD Centre for Tax Policy and Administration.

Regarding Pillar Two, the G-7 Group welcomed the "progresses in domestic legislation toward the implementation" and requested further administrative guidance from the IF to speed up the procedure.

Within the European Union, the Netherlands expects to submit a bill on the implementation before summer, whereas the German Ministry of Finance has already published a discussion draft. Most recently, the Czech Republic has published a draft law proposal on the implementation.

Note 1: Pillar One aims to redistribute some of the profits of multinational companies to market countries through a nexus approach, mitigating double taxation of profits and avoiding a harmful tax and trade war.

Note 2: The goal of Pillar Two is to ensure that multinational enterprises (MNEs) with revenues over EUR 750 million pay at least a minimum level – at an effective rate of 15% – on income arising in each of the jurisdictions in which they operate. For the collection of these taxes, jurisdictions may apply domestic minimum top-up taxes if they comply with GloBE rules, called qualifying domestic minimum top-up taxes (QDMTTs). The OECD published the model rules for the global anti-base erosion (GloBE) proposal under Pillar Two in 2021, followed by a commentary in February 2022 and further guidance released in December 2022 and February 2023.

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