The Organization for Economic Cooperation and Development (OECD) has announced that 136 countries and jurisdictions, including Canada, of the 140 members of the OECD/G20 Inclusive Framework have agreed that certain multinational enterprises (MNE) will be subject to a minimum 15% tax rate and other international tax reforms, effective from 2023. The announcement, which was made on October 8, 2021, updates and finalizes an earlier political agreement by members of the Inclusive Framework and also includes new details of the planned regime. The agreement addresses the OECD’s proposed two-pillar approach to address tax challenges arising from the digitalization of the economy.

Following this announcement, the two-pillar approach will be delivered to the G20 Leaders Summit in Rome at the end of October 2021. According to the OECD, the countries intend to sign a multilateral convention during 2022, with effective implementation in 2023. The convention, which is already under development, will be used to implement the newly agreed taxing right under Pillar One and remove all existing digital service taxes and other unilateral measures. The OECD also indicates it will develop model rules for bringing Pillar Two into domestic legislation during 2022, to be effective in 2023.

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