OECD Secretariat seeks input on global minimum tax design


On 8 November, the Organisation for Economic Co-operation and Development (OECD) Secretariat published a Public consultation document: the Global Anti-Base Erosion Proposal (‘GloBE’) (Pillar II) which seeks stakeholders’ views on the introduction of common global minimum tax rules across the more than 130 countries participating in the OECD Inclusive Framework. Such rules would operate through top-up taxes and other defensive measures where a multinational group’s income is not subject to sufficiently high levels of tax. Together, these rules are known as the GloBE proposal.

The GLoBE proposal is the second part of the OECD’s efforts to develop a two-pronged solution (alongside ‘Pillar I’ Proposals, which seek to rewrite profit allocation rules for large ‘consumer facing’ businesses) to the tax challenges arising as a result of globalisation and digitalisation.


Unlike the Pillar I proposals, the GLoBE proposal envisions minimum tax rules that apply to large international businesses in all sectors (subject to potential carve-outs) and could therefore significantly increase tax and compliance costs for an even wider range of businesses.

Components of the GLoBE proposal

The GLoBE proposal has four main components and will function as a top-up to an agreed minimum tax rate:

  • an income inclusion rule that would tax the income of a foreign branch or a controlled entity if that income was subject to tax at an effective rate that is below a minimum rate;
  • an undertaxed payments rule that would operate by way of a denial of a deduction or imposition of source-based taxation (including withholding tax) for a payment to a related party if that payment was not subject to tax at or above a minimum rate;
  • a switchover rule to be introduced into tax treaties that would permit a residence jurisdiction to switch from an exemption to a credit method where the profits attributable to a permanent establishment (PE) or derived from immovable property (which is not part of a PE) are subject to an effective rate below the minimum rate; and
  • a subject to tax rule that would complement the undertaxed payment rule by subjecting a payment to withholding or other taxes at source and adjusting eligibility for treaty benefits on certain items of income where the payment is not subject to tax at a minimum rate.

However, “the actual rate of tax to be applied under the GLoBE proposal will be discussed once other key design elements of the proposal are fully developed,” the draft says.

These rules would be implemented by way of changes to domestic law and tax treaties and would incorporate a co-ordination or ordering rule.

Requested comments on technical design aspects

The consultation document sets out several questions about determining a common tax base for calculating effective tax rates under the GLoBE proposal and simplifications to help mitigate the effects of structural differences that may occur when calculating tax bases in parent and subsidiary jurisdictions.

Comments are requested specifically on three technical design aspects of the GloBE proposal:

  • the use of financial accounts as a starting point for the tax base determination, as well as different mechanisms to address timing differences;
  • the level of blending under the GloBE proposal, that is the extent to which an MNE can combine high-tax and low-tax income from different sources taking into account the relevant taxes on such income in determining the effective (blended) tax rate on such income; and
  • experience with, and views on, carve-outs and thresholds considered as part of the GloBE proposal.

More information can be found in our newsletter.

Next steps

Following a period to 2 December 2019 for stakeholders to provide written comments, a public consultation meeting will take place in Paris on 9 December 2019. The OECD seeks political agreement among the members of the Inclusive Framework on the basic architecture of the proposed changes in January 2020 so that more detailed technical work on the mechanics of both Pillars can take place throughout 2020.

For a deeper discussion of how these issues might affect your business, please call your usual PwC contact or Evi Geerts.