GFMA

Tax - profit shifting - Global Minimum Tax - Organisation for Economic Co-operation and Development (OECD) - Pillar 2.

(IIR).

The Income Inclusion Rule is the primary calculation mechanism to ensure that large multinational entities are subject to a global minimum tax rate.

The tax jurisdiction of the ultimate parent collects top-up tax in relation to foreign subsidiaries with effective tax rates below the minimum rate of 15%.

Two interlocking rules

"The [Pillar 2] provisions are made up of the following two interlocking rules:

• Income Inclusion Rule (IIR): this is the primary calculation mechanism. The ultimate parent territory collects the top-up tax associated with foreign subsidiaries with an effective tax rate (ETR) below 15%.

• Undertaxed Payments Rule (UTPR): subsidiary territories collect the top-up tax in respect of a low-taxed overseas sister or parent company, where it is not captured by a parent territory IIR."

Graham Robinson, international tax and treasury partner PwC & Iain McDonald international tax and treasury director PwC - The Treasurer, Issue 4 2022 - December 2022, p40.

See also

• Base erosion and profit shifting (BEPS)
• Corporation Tax
• Effective tax rate (ETR)
• Global Anti-Base Erosion Rules (GloBE)
• Income Tax
• Multinational corporation/company
• Nexus rule
• Organisation for Economic Co-operation and Development (OECD)
• Parent company
• Pillar 1
• Pillar 2
• Profit shifting
• Regime
• Sister company
• Subject To Tax Rule
• Tax
• Tax avoidance
• Tax compliance
• Tax evasion
• Tax haven
• Tax rate
• Top-up tax
• Transfer pricing
• Undertaxed Payments Rule (UTPR)

External links

• OECD - Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two) - Commentary
• Pillar Two rules in a nutshell - OECD