The OECD is seeking input on the introduction of common global minimum tax rules. These rules would operate through top up taxes and other defensive measures where a multinational group’s overall income is not subject to sufficiently high levels of tax. The so-called 'GloBE Proposal ' is the second part of the OECD’s efforts to develop a two-pronged solution to addressing the tax challenges of the digitalisation of the economy. The Programme of Work is divided into two pillars:
Pillar One – more income will be taxed in the markets i.e. where the customers are
Pillar Two – a multinational group will be subject to a global minimum effective tax rate.
These changes represent a structural change to the current corporate international tax system. It has the potential to affect many international businesses, regardless of industry. The changes are expected to progress quickly, with a high level agreement expected in January 2020, and agreement on more detailed rules by the end of 2020 for implementation in 2021 and beyond.
Inland Revenue has issued the 2019 Multinational Enterprise Compliance Focus (MECF) guide providing a comprehensive outline of the international tax measures that have recently been implemented along with setting out its programme of work to ensure compliance with these. Inland Revenue also hosted sessions in Wellington and Auckland to launch the MECF.
The guide clearly outlines complex issues whilst still being comprehensive and useful - we would recommend sharing the guide outside of your tax teams (as well as within) to provide a snapshot of Inland Revenue’s focus areas.