The translation into domestic law is aimed at achieving: 1. a domestic taxing right consistent with the design of Amount A; 2. relief of double taxation; 3. incorporation of procedures to administer the new rules and 4. processes to improve dispute resolution. As existing tax treaties contain provisions that would generally prevent the application of Amount A, even after it has been implemented in domestic legislation, changes to public international law are also needed, likely through the development of a multilateral convention. A multilateral convention would need to contain the following elements: 1. removal of treaty barriers to determine a new Amount A tax; 2. elimination of double taxation; 3. procedure for tax certainty regarding amount A and 4. other tax-certainty processes beyond Amount A. Finally, in addition to the domestic and the public international law changes, guidance will be developed to secure coordinated implementation.
Procedural issues regarding Pillar Two Focus on a consensus based and consistent solution As the Inclusive Framework continues to work toward consensus agreement on Pillar Two, it is important to be clear what form that consensus will take. The expectation is that, in contrast to Pillar One, consensus on Pillar Two will not require a commitment by each country to fully implement the Pillar Two rules. Is Pillar Two to be done in the form of minimum standard? Alternatively, is it to be a recommendation or will it take some other form?
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Further on it is important to ensure that countries that choose to implement the Pillar Two rules do so in a manner that is consistent with the parameters of Pillar Two. Such consistency is essential to ensuring that the rules interlock in the intended manner and that the result of Pillar Two is not taxation in excess of the agreed minimum rate due to the imposition of multiple top-up taxes. The exigence of a harmonized approach stresses the tremendous amount of coordination that would be required both among entities in an MNE group and among tax authorities. For Pillar Two the development of model legislation, standard documentation and guidance, designing a multilateral review process if necessary and exploring the use of a multilateral convention, which could include the key aspects of Pillar Two are conceived as crucial for the implementation. A Public Consultation Document on the Pillar Two Blueprint specifically requests stakeholder input on co-ordination mechanisms or other features of the GloBE that are worth exploring to ensure more tax certainty in applying the Pillar Two rules. It also recognizes the risk of double taxation and controversy resulting from the application the GloBE rules and, in the context of dispute prevention and resolution, requests stakeholder input on additional options to mitigate these risks.
Meaning of tax treaties The Blueprint concludes that tax treaties should not present any obstacle to jurisdictions implementing an IIR and UTPR along the lines envisaged under the GloBE. It includes a number of references to the OECD Model Tax Convention and its commentaries, noting that, with limited exceptions, tax treaties are not intended to restrict a jurisdiction’s right to tax its own residents. For the IIR, reference is made to paragraph 81 of the Commentary to Article 1 of the OECD Model Tax Convention that states that “(…) controlled foreign company legislation structured in this way is not contrary to the provisions of the Convention.” The Blueprint regards the IIR as “similarly compatible with the provisions of tax treaties.” For the UTPR, the Blueprint
