TaxTonic #40: Part 2 of 'Unraveling the BEPS 2.0 Impact'

Episode Duration:

100 Minutes

Episode Background:

'TaxTonic', a 'subscriber only' thought leadership series, is Taxsutra's endeavour to consistently deliver top notch technical content to it's readers. The labyrinth of tax rulings on convoluted transactions keeps the world of taxation unpredictable and ever-evolving. This series will feature engrossing presentations, incisive analyses and a deep-dive by the tax experts on burning issues & controversies. So, gear up for a 'tonic' to chisel your tax mind and challenge your wit.

Speakers:

- CA Utkarsh Trivedi (Deloitte India)

- CA Madhu Agarwal (Deloitte India)

Moderator:

Mr. Sachin Sastakar (Chartered Accountant)

What shall the episode cover?

The OECD G20 Inclusive Framework launched the “BEPS Project” to counter the tax-base erosion and shifting of profits to low tax jurisdictions and prevent loss of tax revenue for numerous member nations. The Action Plan 1 of the BEPS Project 1.0 dealt with the “Tax Challenges Arising from Digitalisation” which failed to achieve a consensus. This triggered the BEPS Project 2.0 titled “Two- Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the  Economy” (Two-Pillar Solution) which was was formulated with the aim of eliminating tax avoidance arising due to cross-border digital transactions.

Pillar Two primarily aims to tackle the harmful race to the bottom on corporate taxes, by ensuring that the MNE groups pay a minimum corporate tax of 15% in each jurisdiction in which they operate as per Global Anti-Base Erosion Rules (GloBE Rules). Additionally, it also contains a treaty-based right i.e. Subject to Tax Rule (STTR) allowing the developing countries to recover additional tax @ 9% on specified cross-border intra-group payments. OECD G20 Inclusive Framework already issued final guidelines for implementation of GloBE Rules and STTR Multilateral Instrument opened for signature on Oct 2, 2023. There exists a complex mechanism to compute GloBE income and tax under Income Inclusion Rule (IIR), Qualified Domestic Minimum Top-up Tax (QDMTT) and STTR.

In this episode of TaxTonic, the second part of the session broadly covers:

a. Computation of CbCR Safe Harbour.
b. Computation of GloBE Income & Effective tax.
c. Allocation of Taxation rights Under IIR, QDMTT & UTPR.
d. Computation of STTR.
e. Interplay with Pillar One and its impact.