As anticipated in our recent post, the OECD published two blueprints on the architecture of Pillar One (new allocation of taxing rights) and Pillar Two (global minimum tax rate) on 12 October 2020. According to the OECD, the 500 or so pages of the detailed framework “reflect convergent views on key policy features, principles and parameters for a future agreement”.
The key learning points from the blueprints as well as the accompanying Economic Impact Assessment were discussed in our webcast on 22 October, a recording of which can be accessed here: OECD BEPS 2.0: update on latest developments.
A public consultation is now ongoing for both pillars. Interested stakeholders (industry representatives, advisors and civil society) are invited to provide their consultation comments by 14 December 2020.
According to the revised timing announced by the OECD, a consensus-based agreement on both pillars is anticipated by mid-2021. This six-month delay increases the risk that more jurisdictions will move forward with unilateral measures in the absence of a multilateral solution. In particular, the European Union announced plans to release a new digital tax proposal in 2021. France is also resuming the collection of digital services taxes. According to the Financial Times, the French government has taken action in the last few days, formally claiming the tax from several large technology firms. More information on digital taxes is available here.
Key takeaways
- While the OECD project is officially focused on ‘Addressing the Tax Challenges of the Digitalisation of the Economy’, it continues to be clear that the focus is much broader and large companies in most industries will be impacted to some degree.
- The BEPS 2.0 project continues to advance and the blueprints provide detailed frameworks for the two pillars.
- Public consultation is open until mid-December 2020.
- The key parameters of the new rules, like the minimum tax rate, are expected to be agreed upon by mid-2021.
- Taxpayers are advised to follow the developments and to understand how they may be impacted.
