On June 17, 2024 the Inclusive Framework released supplementary elements relating to the report on Amount B of Pillar One and guidance to ensure consistent implementation and application of the global minimum tax under Pillar Two.

Amount B of Pillar One

A report on Amount B, which provides a simplified and streamlined approach to the application of the arm's length principle to baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries, was published on February 19, 2024 pending completion of design aspects, which have now been completed by the Inclusive Framework, allowing jurisdictions to begin with implementation.

The additional guidance published on June 17, 2024 in this respect includes:

• A Statement on the definitions of qualifying jurisdiction within the meaning of section 5.2 and sections 5.3 of the simplified and streamlined approach. This Statement provides the following 2 definitions:
  1. Definition of qualifying jurisdiction for Section 5.2 (Operating expense cross-check), including a List of Qualifying Jurisdictions within the meaning of section 5.2 (Operating expense cross-check) – June 2024; and
  2. Definition of qualifying jurisdiction for Section 5.3 (Data availability mechanism), including a List of Qualifying Jurisdictions within the meaning of section 5.3 (Data availability mechanism) – June 2024.
• A Statement on the definition of covered jurisdiction for the Inclusive Framework political commitment on Amount B. In this statement the following definition of a covered jurisdiction is given:
  • The criteria relevant for determining the list of covered jurisdictions are as follows:
    1. Low- and middle-income IF jurisdictions using the World Bank Group country classifications by income level, excluding EU, OECD, and G20 member countries.
    2. Extend to low- and middle-income IF jurisdictions that are OECD and G20 member countries that otherwise satisfy the first criterion and that expressed to the Inclusive Framework a willingness to apply Amount B by March 2024.
    3. Any non-IF member that meets the first criterion and expresses to the Inclusive Framework a willingness to apply Amount B will be added to the list of covered jurisdictions.
    4. The list of covered jurisdictions would be published on the OECD website. The list of covered jurisdictions will be reviewed every 5 years.
    5. Members of the Inclusive Framework can extend the political commitment to any other IF or non-IF member on a bilateral basis.

The Statement also includes a List of Covered Jurisdictions for the Inclusive Framework political commitment on Amount B – June 2024

Further work on the Pillar One package, including the Amount B framework, is ongoing as indicated in the Statement by the Co-Chairs of the Inclusive Framework on May 30, 2024.

Pillar Two

On June 27, 2024 the Inclusive Framework also released further guidance clarifying and simplifying the application of the global minimum tax and an overview of the streamlined process for recognising qualified status for the legislation of jurisdictions implementing the Global Anti-Base Erosion (GloBE) Rules.

In this respect the Inclusive Framework released the following documents on June 27, 2024:

• Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti Base Erosion Model Rules (Pillar Two), June 2024. This document sets out the fourth set of Administrative Guidance released by the Inclusive Framework. This package includes guidance on application of the recapture rule applicable to deferred tax liabilities (DTL), including how to aggregate DTL categories and methodologies for determining whether a DTL reversed within five years. This guidance also clarifies how to determine deferred tax assets and liabilities for GloBE purposes when the rules result in divergences between GloBE and accounting carrying value of assets and liabilities. It also includes further guidance on cross-border allocation of current and deferred taxes, allocation of profits and taxes in certain structures involving Flow-through Entities, and the treatment of securitisation vehicles.
• On May 27, 2024 the Inclusive Framework released an update of the Guidance on the Implementation of Country-by-Country Reporting: BEPS Action 13. In December 2022, the Inclusive Framework agreed a significant simplification to the GloBE Rules with the Transitional CbCR Safe Harbour which is based on financial information used for purposes of Country-by-Country (CbC) Reporting. In December 2023, the Inclusive Framework had released further guidance related to the use of the Transitional CbCR Safe Harbour under the GloBE Rules which provided that intragroup payments need to be treated consistently in the payer and recipient jurisdiction. The Inclusive Framework additional interpretative CbCR guidance which was released on May 27, 2024 also ensures the consistent treatment of those intragroup payments and avoids the need for further adjustments under the global minimum tax where a consistent treatment is applied in the first place.
• In light of the rapid adoption of the global minimum tax, the Inclusive Framework has agreed a streamlined process for recognising which jurisdictions have qualified rules. The Inclusive Framework Secretariat has now published on the OECD website a Question & Answer document summarising the main features of this Transitional Qualification Mechanism. The questions in this document include a.o:
  1. Are jurisdictions required to adopt the Global Minimum Tax?
  2. Why do the rules need to be qualified for purposes of the Global Minimum Tax?
  3. Why is the peer review used to recognise the qualified status?
  4. How is the peer review conducted?
  5. What is the purpose of the transitional qualification mechanism?
  6. Which rules can be considered as qualified under the transitional qualification mechanism?
  7. From when does the transitional qualified status apply? When does it stop?
  8. Is it possible to prepare a self-certification based on draft legislation?
  9. Can an implementing jurisdiction’s legislation lose the transitional qualified status? What are the consequences for MNE Groups?
  10. Does the Inclusive Framework publish a list of jurisdictions’ legislation with transitional qualified status?
  11. What are the next steps?

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