On 1 July 2021, the OECD / G20 Inclusive Framework on BEPS issued a Statement which 130 members of the Inclusive Framework agreed to. The Statement deals with a number of key aspects of global tax reform as set out in the OECD BEPS 2.0 plan, and states that a detailed implementation plan together with remaining issues will be finalised by October 2021.
Nine members of the Inclusive Framework chose not to sign up to the current proposals; Ireland, Barbados, Estonia, Hungary, Kenya, Nigeria, Peru, Saint Vincent and the Grenadines, and Sri Lanka.
The Irish Department of Finance issued a press release confirming support of Pillar One and broad support of Pillar Two, noting their reservations on the proposal for a global minimum effective tax rate of “at least 15%” and saying that Ireland will continue to constructively engage in further discussions and technical work on the BEPS process. The Department of Finance is also going to launch a consultation process to garner views on the statement from businesses with Irish operations.
Pillar One of the announcement is a significant departure from the standard international tax rules of the last 100 years, which largely require a physical presence in a country before that country has a right to tax.
The Pillar Two announcement on a global minimum level of taxation could have a significant impact on tax competition amongst jurisdictions.
As final tax reform proposals move ever closer and US tax reform progresses in parallel, it will be important for all large businesses who are likely to be in scope to understand the impact of these proposals on their business, and in particular, on their likely effective tax rate and on the additional resources required to comply with the complex measures.
It will also be important for businesses that are not in scope of the new proposals to monitor whether implementation of proposals could impact them and to have their voice heard in the upcoming consultation process.
For further insights on the OECD / G20 Inclusive Framework and Department of Finance’s announcements, and what it could mean for businesses operating in Ireland, click here.
If your business is potentially affected by these proposals, please contact your KPMG team that can assist you with advice including modelling how the proposed BEPS 2.0 changes will impact your business.