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Multinationals will pay a minimum Corporate Tax of 15%.

Multinationals will pay a minimum Corporate Tax of 15%

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Under the new OECD global tax framework, a total of 136 countries signed the “Declaration on a Two-Pillar Solution to address the tax challenges arising from Digitalization and the Economy”, which means and implies the redistribution of some $125 billion of profits around the 100 largest economies to other countries.

1. What are the pillars of this Declaration?

The agreement is based on two pillars, as follows: 

  • Pillar 1 fixes the volume of the residual profit of the companies, sharing it among the countries where the companies operate. The agreed figure was 25% of this residual profit.

According to José Antonio Ocampo, former Colombian minister and former executive director of ECLAC, “what is called Pillar One of the agreement, which allows redistribution among the countries where multinationals operate, applies to a little more than 100 very large companies. On the other hand, the profits that can be subject to redistribution at the international level are barely 25% of the profits of the companies above a (profitability) rate of 10%. It’s a very small amount indeed and almost all the profit goes to developed countries.”

  • Pillar 2 establishes a minimum Corporate Tax of 15%. 

In this regard, “And then the 15% minimum (tax) rate was agreed upon, but it applies only to large companies, having a very clear preference for the minimum tax is levied in the countries where these companies have their headquarters. This is normally in a developed country. So, what remains for developing countries, according to all the estimates performed, is very little”, said the former minister.

2. When will this new Declaration be discussed further?

This agreement will be discussed at the G20 summit in Rome on October 30 and 31, where the next steps to implement the agreement will be studied.

3. As of when would these measures apply?

These measures, if approved, would apply as of 2023.

Source: CRHoy.com 11/10/21

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