OECD Pillar Two implementation Status

Full Answer Section

    The MTUT applies to multinational enterprises (MNEs) with global turnover of over €750 million. The MTUT is a top-up tax that is designed to ensure that MNEs pay a minimum effective tax rate (ETR) of 15% on their global income. The DTUT applies to UK companies that are not subject to the MTUT. The DTUT is also a top-up tax, but it is designed to ensure that UK companies pay a minimum ETR of 15% on their UK income. Both the MTUT and the DTUT apply for accounting periods beginning on or after 31 December 2023. The UK government has also introduced a number of other measures to support the implementation of Pillar Two, including:

• A new Undermine Tax Agreement (UTA) with the United States, which will help to ensure that the MTUT and the DTUT are applied in a coordinated manner.
• A new GloBE Rules Disclosure Guidance, which provides guidance to businesses on how to comply with the new Pillar Two disclosure requirements.

The UK is one of the first countries in the world to implement Pillar Two. The UK's implementation of Pillar Two is expected to have a significant impact on MNEs that operate in the UK and in other jurisdictions. Additional thoughts: The UK's implementation of Pillar Two is a significant step forward in the global effort to address tax avoidance by multinational enterprises. The UK's implementation is also notable for its speed and efficiency. The UK government was able to implement Pillar Two within two years of the OECD's release of the Pillar Two Model Rules. The UK's implementation of Pillar Two is likely to be a model for other countries. The UK government has already published detailed guidance on how to comply with the new Pillar Two rules. This guidance is likely to be helpful to businesses that are operating in multiple jurisdictions. The UK's implementation of Pillar Two is a positive development for both governments and businesses. Governments will be able to collect more tax revenue from multinational enterprises, and businesses will have more certainty about their tax liabilities.  

Sample Solution

   

I choose to focus on the United Kingdom, as it is one of the most advanced countries in the world in terms of Pillar Two implementation.

Resource:

• UK passes Finance (No.2) Act 2023 introducing OECD Pillar Two measures: https://globaltaxnews.ey.com/news/2023-1243-uk-passes-finance-no2-act-2023-introducing-oecd-pillar-two-measures

Summary:

The United Kingdom has implemented Pillar Two through the Finance (No.2) Act 2023, which was enacted on 11 July 2023. The Act introduces two new taxes: the Multinational Top-up Tax (MTUT) and the Domestic Top-up Tax (DTUT).