During their plenary meeting of May 28-29, 2019 the members of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) adopted a programme of work to develop a consensus solution to the tax challenges arising from the digitalisation of the economy. The document contains a road map for resolving the tax challenges arising from the digitalisation of the economy, and committed to continue working toward a consensus-based long-term solution by the end of 2020.
The programme of work, calls for intensifying international discussions around the following 2 main pillars:
1 The first pillar will explore potential solutions for determining where tax should be paid and on what basis ("nexus"), as well as what portion of profits could or should be taxed in the jurisdictions where clients or users are located ("profit allocation").
2 The second pillar will explore the design of a system to ensure that multinational enterprises – in the digital economy and beyond – pay a minimum level of tax. This pillar should provide countries with a new tool to protect their tax base from profit shifting to low/no-tax jurisdictions, and is intended to address remaining issues identified by the OECD/G20 BEPS initiative.
The programme of work discusses a.o. the following topics:
· Revised Nexus and Profit Allocation Rules (Pillar One)
o New profit allocation rules
§ Overview
§ Modified residual profit split method
§ Fractional apportionment method
§ Distribution-based approaches
§ Explore the use of business line and regional segmentation
§ Design scoping limitations
§ Develop rules on the treatment of losses
o New nexus rules
o Implementation of the new taxing right
§ Elimination of double taxation
§ Administration
§ Changing existing tax treaties
· Global anti-base erosion proposal (Pillar Two)
o GloBE proposal
o Income inclusion rule
§ Top up to a minimum rate
§ Use of a fixed percentage
§ Exploration of simplifications
o Tax on base eroding payments
o Rule co-ordination, simplification, thresholds and compatibility with international obligations
· Organisation of the work to deliver the programme of work and next steps
o Overall Approach
o Organisation of the work
o Next Steps
Click here to be forwarded to the Programme of Work to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalisation of the Economy as adopted by the members of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) during their plenary meeting of May 28-29, 2019.
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