In January, Benjamin Angel, the director of direct taxation for the EC, said member states had three options to implement the OECD’s 15% minimum tax. They could:
- elect to increase their corporate tax rate to at least 15 percent for all companies.
- increase their corporate tax rate to 15 percent only for in-scope companies; or
- not increase their tax rate at all and instead have the jurisdiction of the parent company collect a top-up tax.
There is a fourth option, that of introducing a Qualified Minimum Domestic Top-up-Tax (QMDTT). This option was introduced by the OECD model pillar Two rules published on 20 December. The QMDTT changes the rule order and gives priority taxing rights to the source country. The priority order of the pillar Two rules is now QDMTT then the Income Inclusion Rule (Top-up-tax in the parent jurisdiction) and then the Undertaxed Payment Rule.
This blog considers the responses to pillar Two seen to date and the impact that the introduction of QDMTT might have on policy behaviours.
Read the full blog here