On 1 July 2021, in an historic agreement, 130 countries approved a statement providing a framework for reform of the international tax rules. These countries are members of the OECD/G20 Inclusive Framework on BEPS (“IF”), comprising 139 countries.
Malta is one of the member countries which agreed to the statement.
The statement sets forth the key terms for an agreement of a two-pillar approach to reforms and calls for a comprehensive agreement by the October 2021 G20 Finance Ministers and Central Bank Governors meeting, with changes coming into effect in 2023. Pillar One of the agreement 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. Pillar Two secures an unprecedented agreement on a global minimum level of taxation which has the effect of stipulating a floor for tax competition amongst jurisdictions.
The framework for reforms agreed by the 130 members of the IF will have a wide-reaching effect on many MNEs. Given the ambitious timeline for implementation, it is important that potentially impacted businesses understand what is coming and prepare for the resulting changes. Tracking the timeline for further developments, MNEs should:
KPMG Malta is closely monitoring developments on Pillars One and Two at a global/political level, at OECD, EU and local levels and within particular jurisdictions. Should you wish to have a discussion around these developments, please do not hesitate to get in touch with us.