KPMG report: Global formulary apportionment
Some are asking (again) whether it is finally time to adopt formulary apportionment
Some are asking (again) whether it is finally time to adopt formulary apportionment
The international corporate tax system is in a state of flux, with numerous reform initiatives being proposed by national governments and international institutions. Some academics, and even the European Commission (EC), are asking (again) whether it is finally time to adopt formulary apportionment—an alternate way to allocate taxing rights over multinationals first considered and rejected by the League of Nations in the 1930s. Indeed, some are pointing to the OECD/G20 Inclusive Framework’s work on Pillar One as a first step toward formulary apportionment.
However, a country would face significant challenges if it sought to adopt formulary apportionment unilaterally, from defining a multinational group, to selecting an allocation formula that does not undermine its international competitiveness. In addition, there are substantial obstacles to countries reaching a multilateral agreement to implement formulary apportionment.
Read a 2022 report* [PDF 537 KB] prepared KPMG LLP
Read related reports on KPMG LLP’s webpage: Future of the Arm's Length Principle
*This article originally appeared in Tax Notes International (22 August 2022) and is provided with permission.
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