Overview
Commenting on the consultation, James Ross, Tax partner at McDermott Will & Emery, said:
“The UK consultation document, as expected, sticks very closely to the laid down by the OECD. The main point of interest is that as well as introducing the income inclusion rule for UK-headed multinational groups together with the backstop “undertaxed payment rule”, the Government has indicated its intention to introduce a domestic minimum tax, which would apply the minimum 15% tax to the collective profits of UK companies that are members of a group within the scope of Pillar 2. Such a charge is countenanced but not mandated by the OECD Pillar 2 report. The Government’s thinking appears to be that where a group that is within the scope of Pillar 2 is subject to an effective rate of UK corporation tax that is below 15%, it will be subject to top-up tax somewhere under Pillar 2 – and it is in the UK’s interests to impose that top-up tax itself rather than leave it on the table for another tax authority. As the EU’s draft directive to implement Pillar 2 also mandates a domestic minimum tax in all EU Member States, this would appear to be a growing trend, and it would not be surprising if we see more countries taking the same approach.”