BDO Corporate Tax News

The following is a summary of the updates to BDO’s Pillar Two Tracker that were made during the period August – October 2024. Please review the tracker for details of the updates.

• Australia: On 22 August, the House of Representatives passed three bills that would implement the Pillar Two rules into Australian legislation. The bills generally remain unchanged from the exposure draft legislation released on 21 March for public consultation and for which the ATO has highlighted feedback received on its website. The Senate now will review the bills. The Senate Standing Economics Legislation Committee released a report recommending enactment of the three bills.
• Bahamas: The government presented a bill to the House of Assembly on 16 October 2024 that would introduce a domestic minimum top-up tax that is aligned with the OECD's Pillar Two global tax framework. Minor modifications have been made to the Domestic Minimum Top-Up Tax Bill to clarify its geographic scope.
• Bahrain: See the article in this issue.
• Belgium: The Ministry of Finance announced on 2 September that in-scope taxpayers that have obtained a company identification number following the submission of the notification can make advance payments of the minimum tax. The payment must be made no later than 20 December 2024. A July Royal Decree contains information on the mechanics of making advance payments. And a public consultation on the annual return form for the QDMTT recently wrapped up.
• Bermuda: Starting in 2025, a corporate income tax of 15% will be imposed on Bermuda businesses that are part of multinational groups with annual revenue exceeding EUR 750 million. Introduction of the tax fulfils Bermuda's commitments in the OECD global minimum tax initiative.
• Brazil: See the article in this issue.
• Bulgaria: The Ministry of Finance published draft legislation on 23 September that would incorporate the OECD administrative guidelines into the Bulgarian rules.
• Canada: On 12 August, the government announced a public consultation on various tax proposals in Budget 2024, including draft legislation that would introduce a 15% UTPR on profits of covered MNEs, regardless of where they do business.
• Curacao: The Minister of Finance announced on 6 November that the Council of Ministers has approved a draft ordinance implementing the global minimum tax. The ordinance includes an IIR and a domestic top-up tax and, once enacted, it will apply as from 1 January 2025.
• Cyprus: The European Commission announced on 3 October that it was referring Cyprus to the Court of Justice of the European Union for failure to notify the Commission about measures transposing the EU global minimum taxation directive into their domestic laws by the 31 December 2023 deadline. Cyprus has released proposed legislation, but it has not yet been enacted.
• Finland: The government presented draft legislation to parliament on 20 September that would amend the domestic minimum tax law to include the 2023 OECD administrative guidance. Proposed changes include the clarification of certain terms, new rules for the tax treatment of specific types of qualifying marketable transferable tax credits, new deductions, rules addressing hybrid arbitrage arrangements and the adoption of safe harbours. If the draft law is enacted, the revised rules would apply to fiscal years starting on or after 1 January 2024.
• France: The Finance Bill for 2025, presented on 10 October, includes measures to implement the OECD administrative guidance into the French Pillar Two legislation.
• Germany: A consultation was held in August and September on draft legislation that would revise the domestic Pillar Two rules to incorporate the OECD administrative guidance relating to the CbC reporting safe harbour rules and address the issue of deferred taxes. On 17 October 2024, the government released the official group parent notification form. The group parent must electronically notify the tax authorities of its status as a group parent, using a government interface, within two months after the end of the tax period for which the tax liability exists. The first notification deadline is 28 February 2025 for calendar year MNE groups (a year later for groups using a different fiscal year).
• Hong Kong: On 30 October 2024, the government published the results of a consultation relating to the implementation of the Pillar Two GloBE Rules that includes feedback from stakeholders and recommends modifications to the proposed legislation. Examples of the recommendations include the introduction of an IIR and minimum top-up tax as from 1 January 2025, but delaying a UTPR pending further review and excluding investment entities and insurance investment entities from the scope of the minimum top-up tax. A bill is expected to be presented by January 2025 and enacted by mid-year.
• Iceland: The Ministry of Finance and Economic Affairs held a public consultation on plans to present an amendment to parliament on a global minimum tax. Iceland intends to adopt the EU directive as the country is part of the internal market through the EEA agreement.
• India: India’s budget for 2024-25 does not include a roadmap or details on the introduction of Pillar Two, although the finance minister mentioned in the post-budget conference that abolition of the Equalisation Levy is a step in the direction of the implementation of the Two Pillar framework.
• Indonesia: A Ministry of Finance regulation that applies as from 9 October 2024 extends the tax holiday incentive for new investments made in specific pioneer industries through 31 December 2025 and provides that taxpayers benefiting from the corporate income tax reduction under the incentive will be subject to the global minimum tax rules in Indonesia (once introduced), i.e., taxpayers may be subject to the domestic minimum top-up tax, even those benefiting from the tax reduction before the incentive was introduced in 2022.
• Ireland: The Finance Bill 2024 released on 10 October and approved by the senate on 6 November incorporates parts of the OECD's administrative guidance on the global minimum tax, including an amended definition of a hybrid entity and clarification of the definition of the owner of a flow-through entity and amended rules on deferred tax. The bill has now been sent to the president for signature.

The tax authorities released an ebrief on 8 August announcing a new Tax and Duty Manual - Global Minimum Level of Taxation for Multinational Enterprise Groups and Large-Scale Domestic Groups in the Union - Administration. The manual includes detailed guidance on various administrative requirements under the minimum tax, such as registration procedures, the IIR, UTPR and QDMTT returns, tax payments, compliance and enforcement, etc.

• Isle of Man: Draft legislation for a global minimum tax will soon be submitted to parliament and will contain a QDMTT and an IIR. Both taxes will aim to ensure that covered MNEs pay at least a 15% tax on their profits generated within and outside the Isle of Man. The rules will apply to fiscal years starting on or after 1 January 2025.
• Italy: Two decrees contain implementing rules on the substance-based income exclusion to be applied when calculating the amount of top-up tax and rules on the domestic minimum top-up tax.
• Japan: The tax authorities have updated the interpretative guidance on the global minimum tax law and regulations to add the requirements of the QDMTT safe harbour, incorporate the OECD administrative guidance and clarify the CbCR safe harbour and the substance-based income exclusion.
• Jersey: The government announced on 22 October that the States Assembly has adopted the draft legislation to implement a Pillar Two IIR and a multinational corporate income tax (MCIT, aligned with the OECD GloBE model rules). There currently are no plans for a UTPR. The rules will apply for fiscal years starting as from 1 January 2025, with further tax legislation expected in 2025. Procedural actions still must be taken before the legislation is in effect. The government also announced that Jersey plans to create an OECD-compliant qualifying refundable tax credit to provide incentives for business growth following the adoption of the Pillar Two rules.
• Kenya: A new proposal for a global minimum tax was published on 1 November. The proposal was originally included in the finance bill for 2024, which was withdrawn by the president following widespread protests to other provisions.
• Korea: The 2024 Tax Law Amendment proposal includes changes to the GloBE rules as implemented in Korea. Proposed changes address methodologies for determining consolidated revenue, reversals of deferred tax liability accruals, allocating the UTPR top-up tax amount to constituent entities, determining the status of a flow-through entity as tax transparent entity or a reverse hybrid and transitional filing deadlines.
• Kuwait: The Ministry of Finance has accelerated progress on a proposal to introduce Pillar Two legislation, although it is not yet finalised and will be subject to the approval of the Council of Ministers. Based on press reports, Kuwait plans to apply Pillar Two in Kuwait from 1 January 2025 and a broader business profit tax (BPT) is planned for all entities operating in Kuwait at a flat 15% corporate income tax rate. The BPT should be introduced by 2026.
• Lithuania: The Ministry of Finance proposed revisions to its legislation on 24 September to fully transpose the EU Minimum Taxation Directive into domestic law. Changes are also proposed to the Law on Tax Administration to integrate the top-up tax into the domestic tax system and proposed changes to the Law on Corporate Income Tax would make any top-up tax paid non-deductible.
• Luxembourg: On 31 October, the government submitted several changes to the Pillar Two legislation to parliament that incorporates the 2023 OECD administrative guidance. Once approved, the amendments would apply for fiscal years starting on or after 31 December 2023.
• Malaysia: The government has clarified that Zakat is not considered a “covered tax” for purposes of the GloBE rules.
• Malta: The 2025 proposed budget measures presented on 28 October include an update on the global minimum tax (for an analysis of the budget, see the tax alert prepared by BDO in Malta). Malta has opted to delay the implementation of the EU minimum taxation directive for another year, taking a cautious approach given the current uncertainties. Meanwhile, Malta is engaging in detailed discussions with the European Commission to introduce grants or tax credits that align with EU and OECD rules, aiming to provide the certainty needed to ensure that Malta is viewed as a competitive jurisdiction. On 3 October, the European Commission closed the infringement proceedings against Malta for failure to notify the Commission about measures transposing the EU global minimum taxation directive into their domestic laws by the 31 December 2023 deadline.
• Netherlands: The 2025 tax plan released on 17 September includes technical amendments to the legislation, as well as the incorporation of the OECD administrative guidance into the Minimum Tax Act 2024.
• Norway: The government announced that a UTPR would be introduced as part of the 2025 budget.
• Poland: On 25 September, the government sent the draft bill implementing the EU minimum taxation directive to parliament following the public consultation that was held in April and May. The European Commission announced on 3 October that it was referring Poland to the Court of Justice of the European for failure to notify the Commission about measures transposing the EU global minimum taxation directive into its domestic law by the 31 December 2023 deadline.
• Portugal: On 18 October, parliament approved the draft legislation that will implement the EU global minimum taxation directive into domestic law, but the legislation still must be published before it becomes effective. The legislation includes the introduction of an IIR and UTPR, and Portugal has opted to adopt a QDMTT as provided in the directive to ensure a 15% minimum tax on Portuguese resident entities on a consolidated basis. Also included is an option to apply the transitional CbCR safe harbour for tax years commencing on or before 31 December 2026 and ending on or before 30 June 2028. Once in effect, the IIR and QDMTT will apply for fiscal years starting on or after 31 December 2024 and the UTPR will apply for fiscal years starting on or after 31 December 2025. The European Commission announced on 3 October that it was referring Portugal to the Court of Justice of the European for failure to notify the Commission about measures transposing the EU global minimum taxation directive into its domestic law by the 31 December 2023 deadline.
• Puerto Rico: A public consultation was held in September and October on plans for implementing the global minimum tax. The government is considering the introduction of a QDMTT, but not an IIR or UTPR.
• Singapore: Parliament passed the Multinational Enterprise (Minimum Tax) Bill and the Income Tax (Amendment) Bill on 15 October, but the bills still must be assented to by the president. The legislation would introduce a multinational enterprise top-up tax (which would apply the IIR) and a domestic top-up tax (DTT) as previously announced in the 2024 Budget Statement. The minimum tax bill would also provide the Comptroller of Income Tax with the powers to administer, collect and enforce both taxes. The IIR and DTT would apply for fiscal years starting on or after 1 January 2025. A UTPR will be considered at a later stage.
• Slovak Republic: On 11 September, the government approved the draft bill that would make changes to its global minimum global taxation legislation to incorporate the OECD’s 2023 administrative guidance. The bill still must be signed by the president and once enacted, the measures will apply as from 31 December 2024.
• Spain: The European Commission announced on 3 October that it was referring Spain to the Court of Justice of the European for failure to notify the Commission about measures transposing the EU global minimum taxation directive into its domestic law by the 31 December 2023 deadline.
• Sweden: A draft bill submitted to parliament on 15 October would revise the provisions of the Pillar Two legislation to incorporate the OECD administrative guidance and to address artificial arrangements under the simplification rule and potentially allowing the offset of foreign additional tax in cases involving controlled foreign companies.
• Switzerland: In a press release issued on 4 September, the Federal Council announced it has decided to introduce an IIR as from 1 January 2025.
• Taiwan: The Ministry of Finance has stated that the government intends to introduce a 15% global corporate minimum tax on large multinational entities starting in 2026. The rules would be in line with the OECD’s Pillar Two standards and would revise the existing 12% alternative minimum tax but would only affect in-scope entities that do not have an ETR of 15%.
• Turkey: The law implementing the OECD Pillar Two global minimum tax was published in the official gazette on 2 August. The enacted measures include an IIR and qualifying domestic minimum corporate tax that apply to fiscal years starting from 1 January 2024 and a UTPR that will apply to fiscal years starting from 1 January 2025. The legislation also includes safe harbours.
• United Kingdom: The tax authorities updated guidance on its website on "How to prepare for the multinational top-up tax and the domestic top-up tax." The update includes details of the reporting obligation relating to the multinational top-up tax, the domestic top-up tax and registration requirements. It also addresses the transitional safe harbour rules and the election under these rules. More guidance is likely to be released on determining the top-up tax amounts and specific entities and structures.