OECD Provides Definitive Guidance on the Global Minimum Corporate Tax

The Organization for Economic Cooperation and Development detailed on Thursday the final guidelines for governments to incorporate the new global minimum corporate tax into their legislation, bringing the implementation of the reform one step closer next year.

In the deepest overhaul of cross-border tax rules in a generation, nearly 140 countries agreed in 2021 to apply a minimum tax rate of 15% to multinationals, committing to a supplementary tax on profits booked in countries with lower rates.

The reform, which the OECD expects to generate an additional $220 billion in tax revenue worldwide, aims to update old rules on cross-border taxation for the digital age, in which tech giants like Apple and Google can book profits. in low tax countries like Ireland.

The final OECD guidance is intended to clarify the remaining details so that governments adopt tax codes in a coherent and coordinated manner in order to limit compliance costs for companies and the possibility of conflicts.

The OECD said it was offering details in particular on how other governments should recognize an existing US minimum tax on global low-tax intangible profits (GILTI), which covers patents, trademarks or copyrights.

See also:

OECD forecasts much more revenue from corporate tax treaties

Highly anticipated by companies and tax advisors, as well as tax administrations, the guide also details the scope of companies covered, as well as operational and transition steps.

The US Treasury Department said the guidance would provide clarity while protecting tax incentives such as the green tax credits contained in the Cut Inflation Act.

The review is gaining momentum ahead of implementation early next year, after EU countries agreed in December to roll out the minimum tax across the 27-nation bloc.

Japan is preparing its national legislation and Switzerland will hold a referendum in June.

However, the prospects are less rosy for the reform plans to reallocate 25% of the profits of the world’s largest multinationals so that they pay taxes in the countries where their clients are, regardless of their physical location.

Source: Reuters