The UK government has published a consultation seeking views for how a worldwide 15% minimum corporation tax should be domestically implemented.
Agreed by over 130 countries in October 2021, the landmark reform comes as part of a two-pillar package first agreed in principle by the G7 last June during talks chaired by the Chancellor in London.
With changes aimed to come into effect from 2023, the consultation will run for 12 weeks and seeks views on the application of the global minimum corporation tax in the UK, as well as a series of wider implementation matters – including who the rules apply to, transition rules and how firms within scope should report and pay.
The Pillar 2 framework will ensure large multinational firms pay tax of at least 15% on profits in each country in which they operate, creating a more level playing field and further cracking down on tax avoidance. It will be operated on a country-by-country basis.
The OECD published detailed guidance on the Pillar 2 framework in December last year which countries will use to implement the rules in domestic law. This includes guidance on how to calculate the effective tax rate (ETR) of a group in a jurisdiction and the steps that should be taken to collect additional tax where the ETR falls below 15%.
Work continues to progress within the OECD on implementation of Pillar 1 of the October 2021 agreement, which reforms taxation rules to ensure a greater share of multinational profit is taxed in the countries in which their customers are located.