OECD/G20 Inclusive Framework on BEPS Releases Updates on:  

AMOUNT B OF PILLAR ONE

The OECD/G20 Inclusive Framework on BEPS has published supplementary elements related to the report on Amount B of Pillar One. This report, initially released on February 19, 2024, provides a simplified approach to applying the arm's length principle to baseline marketing and distribution activities, focusing on low-capacity countries. The recently completed design aspects now allow jurisdictions to begin implementation.

Today's additional guidance includes:

1. Definitions of Qualifying Jurisdictions: These definitions, found in sections 5.2 and 5.3 of the Amount B guidance, will facilitate adjustments to the returns calculated under the streamlined approach for tested parties in these jurisdictions. These definitions are now included in the annex to Chapter IV of the OECD Transfer Pricing Guidelines.
2. Definition of Covered Jurisdictions: These jurisdictions fall under the political commitment on Amount B, which ensures members respect the outcomes of the simplified approach for in-scope transactions. Members commit to mitigating potential double taxation when there is a bilateral tax treaty. This approach promotes tax certainty for jurisdictions interested in implementing Amount B starting January 1, 2025. However, expressing interest does not guarantee implementation.

Further work on the Pillar One package, including the Amount B framework, continues, as indicated by the Co-Chairs of the Inclusive Framework on May 30, 2024.

PILLAR TWO

The Inclusive Framework has also released additional guidance to ensure consistent application of the global minimum tax under Pillar Two. This includes:

1. Administrative Guidance: This guidance clarifies key topics, offering simplified procedures for MNE Groups to aggregate deferred tax liabilities and clarifies methodologies for determining deferred tax assets and liabilities for GloBE purposes. It also addresses the allocation of cross-border current and deferred taxes and the treatment of securitisation vehicles to prevent volatile outcomes under the GloBE Rules. This guidance will be included in the Commentary to the GloBE Model Rules.
2. CbCR Safe Harbour Guidance: Following the significant simplification agreed upon in December 2022, further guidance was released in December 2023 to ensure consistent treatment of intragroup payments. Additional interpretative guidance issued on May 27 ensures these payments are treated consistently, avoiding further adjustments under the global minimum tax.
3. Qualified Status: Under the "common approach" agreed in October 2021, Inclusive Framework members have committed to implementing and applying the GloBE Rules consistently to minimize compliance costs and avoid double taxation. A streamlined process for recognizing jurisdictions with qualified rules has been agreed upon. The Inclusive Framework Secretariat has published a Q&A document summarizing the Transitional Qualification Mechanism, providing jurisdictions and MNEs with certainty about compliance during the transitional period.

These updates and guidance aim to enhance tax certainty and streamline the implementation of global tax rules, ensuring a coordinated approach among jurisdictions.

Recommended read:

1. Report on Amount B Pillar One - Amount B: Inclusive Framework on BEPS | en | OECD
2. Statement on the definitions of qualifying jurisdiction within the meaning of section 5.2 and section 5.3 of the simplified and streamlined approach Pillar One Amount B: Statement on the definitions of qualifying jurisdiction within the meaning of section 5.2 and section 5.3 of the simplified and streamlined approach (oecd.org)
3. Statement on the definition of covered jurisdiction for the Inclusive Framework political commitment on Amount B Pillar One Amount B: Statement on the definition of covered jurisdiction for the Inclusive Framework political commitment on Amount B (oecd.org) 
4. Administrative Guidance: “Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global AntiBase Erosion Model Rules (Pillar Two), June 2024” Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two), June 2024 (oecd.org) 
5. Administrative Guidance, Commentary to the GloBE Model Rules:  “Tax Challenges Arising from the Digitalisation of the Economy – Consolidated Commentary to the Global Anti-Base Erosion Model Rules (2023)” Tax Challenges Arising from the Digitalisation of the Economy – Consolidated Commentary to the Global Anti-Base Erosion Model Rules (2023): Inclusive Framework on BEPS | en | OECD 
6. CbCR Safe Harbour guidance: Transitional CbCR HArbour Guidance “Safe Harbours and Penalty Relief: Global Anti-Base Erosion Rules (Pillar Two)” Safe Harbours and Penalty Relief: Global Anti-Base Erosion Rules (Pillar Two) (oecd.org) 
7. Further Guidance related to the use of the Transitional CbCR Safe Harbour under the GloBE Rules: “Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global AntiBase Erosion Model Rules (Pillar Two), December 2023” Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two), December 2023 (oecd.org) 
8. Additional interpretative CbCR guidance “Guidance on Country-by-Country Reporting: BEPS Action 13 - OECD” 
9. Qualified Status: GloBE Rules “Tax Challenges Arising from Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two) : Inclusive Framework on BEPS | OECD/G20 Base Erosion and Profit Shifting Project | OECD iLibrary (oecd-ilibrary.org)”
10. Qualified Status Q&A Questions and Answers on the Qualified Status under the Global Minimum Tax (oecd.org) 

Source/further recommendation: 

• International tax reform: OECD/G20 Inclusive Framework on BEPS taking further steps on the implementation of the Two-Pillar Solution - OECD