The new tax law has caused many problems, including the potential for double taxation. In addition to the complexity of the legislation, implementation issues can also be complicated. In order to make implementation easier, the OECD and the World Bank have come up with a two-pillar solution to address tax challenges posed by the digital economy. The plan is currently undergoing technical work to address remaining design issues. For example, the tax reform project will deal with issues related to reallocated revenue, reallocation of income, dispute resolution, and GILTI.
While policymaking in Washington is receiving the C-suite’s attention, global tax changes will be in focus starting in 2022. The OECD approved the implementation of a digital tax project last year, and countries will continue to wrestle with finalizing rules for the new system. These rules are set to take effect in 2023, and the OECD has provided $320 million for implementation efforts. By making timely guidance available to businesses, implementation issues on the new tax law will avoid the potential for transactions and projects to be interrupted.
The latest report on the BEPS 2.0 project details the two components of the project. Pillar One focuses on establishing building blocks for future international tax agreement. Pillar Two proposes a system of interlocking international tax rules that ensure large multinational companies pay the minimum amount of tax on their profits across countries. The final report contains a series of recommendations that reflect the consensus of stakeholders. The report can be found here.
The OECD Two-Pillar Global Tax Agreement Watch Page offers a cleaner way to find relevant information. The page includes relevant analysis near the top of the page. OnPoints give users information about key issues, such as the possible impact of the Amount A calculation, as well as deferred tax considerations under Pillar Two GloBE rules. These lists are continually updated as relevant guidance and model rules are published.