OECD Secretary-General Tax Report to G20 Finance Ministers and Central Bank Governors (G20 Brazil, October 2024)

OECD Secretary-General Tax Report to G20 Finance Ministers and Central Bank Governors: G20 Brazil, October 2024

Introduction

Ahead of the final meeting of G20 Finance Ministers and Central Bank Governors under the Brazilian G20 Presidency, the OECD Secretary-General reports on key tax developments since the last meeting in July. Significant progress has been made in implementing the Two-Pillar International Tax Package, particularly the Subject to Tax Rule (STTR) and the Global Minimum Tax.

Two-Pillar International Tax Package

Pillar Two: Raising the Floor on International Taxation of Corporate Revenues

• Subject to Tax Rule (STTR): Recognized as an integral part of Pillar Two, the STTR allows jurisdictions to "tax back" where defined categories of income are subject to nominal tax rates below the STTR minimum rate of 9%. It complements and takes priority over other agreed rules.
• STTR Multilateral Treaty (STTR MLI): Approved by the Inclusive Framework in September 2023, and signed by 19 Inclusive Framework members on 19 September 2024. This treaty ensures that developing countries can request the automatic inclusion of the STTR in bilateral tax treaties.
• Global Minimum Tax: Now a reality, based on countries already implementing the minimum tax. The OECD estimates that approximately 60% of MNEs in scope of the GloBE rules will be subject to the minimum tax regime in 2024, increasing to 90% in 2025.

Consistency and Certainty

To ensure consistency and certainty in implementation:

• GloBE Model Rules: Provide a common starting point for implementing jurisdictions.
• Peer Review Process: Confirms the qualified status of implementing jurisdictions' legislation.
• Administrative Guidance and Safe Harbors: Support the transition from adoption to implementation.
• Information Collection and Dispute Resolution Mechanisms: Ensure a coordinated approach across implementing jurisdictions.

Pillar One: Modernizing the International Tax System for the 21st Century

• Amount A: An international framework for taxing large and highly profitable MNEs. A text of the Multilateral Convention to Implement Amount A (MLC) was released on 11 October 2023, along with an Explanatory Statement and an Understanding on the Application of Certainty for Amount A.
• Amount B: A simplified transfer pricing approach for baseline distribution activity.

Key Developments

• Brazil: Recently published provisional legislation to implement the global minimum tax under the GloBE Rules.
• Bahrain and Türkiye: Recently enacted legislation to implement the global minimum tax.
• Current Status: 45 jurisdictions have already enacted or introduced legislation to implement the global minimum tax, with 16 taking concrete steps toward implementation.

Conclusion

The focus now is on ensuring consistency and certainty in the implementation of Pillar Two, while continuing to support ongoing works to ensure coordination among countries implementing the Global Anti-Base Erosion Rules. This is seen as a resounding success of international taxation cooperation.

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This summary captures the main points and key data from the provided text, focusing on the progress made in implementing the Two-Pillar International Tax Package and the specific actions taken by various countries.