Pillar Two and the Side-by-Side Safe Harbor

The Pillar Two framework, part of the Global anti-Base Erosion (GloBE) rules, is designed to ensure that large multinational enterprises (MNEs) with annual revenue over 750 million euros are subject to a minimum effective tax rate (ETR) of 15% on income in each jurisdiction where they operate.

The framework functions through a combination of mechanisms, chiefly the income inclusion rule (IIR), which imposes a top-up tax on a parent entity for low-taxed foreign income, and the undertaxed profits rule (UTPR), which serves as a backstop. Many jurisdictions are also implementing qualified domestic minimum top-up taxes (QDMTTs) to collect any top-up tax on profits generated within their borders. The so-called “side-by-side” framework was put forth by the G7 in June to create a system that would exempt U.S.-parented MNEs from the Pillar Two rules.

To dig deeper, visit the original article on the Thomson Reuters blog.