Large multinational companies may see a minimum global corporate income tax rate of at least 15% as soon as 2023, and larger multinational companies may also see significant changes to the global allocation of taxation rights. G20 finance ministers reiterated their support for the key elements of Pillar One and Pillar Two at their latest meeting on July 9 and 10, 2021. This support follows an agreement from the OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS), where 132 of its 139 member countries (including Canada) have now agreed on the framework to reform international tax rules under a two-pillar approach (originally 130 member countries had signed on to the agreement issued on July 1, 2021).

The G20 also called on the Inclusive Framework to swiftly address the remaining issues, finalize the design elements, and produce a detailed implementation plan for the two-pillar approach by the G20 Finance Ministers and Central Bank Governors meeting in October 2021. The implementation plan contemplates that the rules would come into effect in 2023.


Generally, the OECD/G20 Inclusive Framework is looking at new tax proposals under two specific "pillars". The first pillar focuses on the allocation of taxing rights, including nexus issues. These proposals typically allocate more taxing rights to market or user jurisdictions where value is created through businesses' participation in the user or market jurisdiction that is not recognized in the current framework for allocating profits. The second pillar focuses on ensuring multinational entities pay a minimum rate of tax.

The OECD released two detailed reports, which it calls "blueprints", on it's proposed two-pillar approach on October 12, 2020. For details, see TaxNewsFlash-Canada 2020-77, "Digital Economy — OECD Releases Taxation Blueprints".

Canada's finance minister and the other G7 finance ministers subsequently agreed to support a minimum global corporate income tax rate of at least 15% on a country-by-country basis under Pillar Two, at a meeting on June 4 and 5, 2021, that considered taxation issues related to globalization and the digitalization of the economy. The G7 finance ministers also committed to several other measures in a communique issued on June 5, 2021, including how market countries would be awarded taxing rights under Pillar One, and coordinating the application of these new international tax rules with the removal of digital services taxes. For details, see TaxNewsFlash-Canada 2021-32, "Minimum Global Corporate Tax Rate Gains Support".

G20 meeting and the OECD/G20 Inclusive Framework agreement

At the most recent G20 meeting on July 9 and 10, 2021, finance ministers reaffirmed their support for a global minimum tax, and the key elements of Pillar One and Pillar Two. The G20 also asked the Inclusive Framework to finalize the design elements of the framework with a detailed plan for the implementation of the two pillars by their next meeting in October 2021. In addition, the G20 supported the plan for a "menu" of policy options on digital transformation and productivity recovery to make better use of digitalization opportunities. Finally, the G20 also agreed to address climate change with a closer international coordination on climate action.

The Inclusive Framework previously announced on July 1, 2021 that 130 of 139 member countries (including Canada) agreed on key political questions and design features of Pillar One and Two following its two-day meeting on June 30 and July 1, 2021. Note, as of July 9, 2021 the number of countries that have signed onto this statement has increased to 132. The statement differs in important respects from the Pillar One and Pillar Two blueprints, but also resolves certain key open items from the blueprints, and builds on them.

For more information, see TaxNewsFlash-Canada 2021-38, "Global Minimum Tax Expected in 2023" or contact your KPMG adviser.

Information is current to July 12, 2021. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500