TaxTonic Session: Demystifying Nuances of BEPS Pillar II!

Episode Duration:
105 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:
- Mr. Rajendra Nayak (Partner,International Tax Services, EY India)

Moderator:
Mr. Sachin Sastakar (Chartered Accountant)

What shall the episode cover?

In October 2021, 136 members of 'OECD G20 Inclusive Framework on BEPS' (IF) out of 140 members (representing more than 90% of global GDP) reaffirmed their agreement on Pillar II envisaging a global minimum tax rate of 15%. So far, 138 countries out of total membership of 142 have agreed on Pillar II. Pursuant to the October 2021 breakthrough, the IF issued Global Anti-Base Erosion (GloBE) Model Rules in December 2021. Additionally, a Commentary on the Model Rules with extensive illustrations was also issued in March 2022.

GloBE Rules are not mandatory but enjoy the status of a common approach for the IF members. Under this common approach, jurisdictions are not required to adopt the GloBE Rules, but, if they choose to do so, they will implement and administer the Rules in a way that is consistent with the agreed outcomes. Against this background, Administrative Guidance has also been issued in February 2023 which is expected to play an important role in promoting certainty under the GloBE Rules by clarifying the interpretation of the GloBE Rules and by providing guidance to tax administrations on how to apply the GloBE Rules.

In the next episode of TaxTonic, Taxsutra presents a discussion to understand the complexities surrounding the global minimum tax. The discussion primarily covered  the following aspects:

1. Basic nature & design of GloBE Model Rules

2. Practical examples for computation of jurisdictional Effective Tax Rate (ETR) and Top-Up Tax (TUT)

3. Impact due to exemptions / deductions given to SEZ units and IFSC units in India on ETR and TUT

4. Results of updated Economic Impact Assessment (Jan 2023)

5. Policy considerations and implementation options for developing countries