The OECD has published a progress report on Amount A of Pillar one[1] on 11 July 2022. This report if open for comment through public consultation until the 19th of August 2022 on the new levy right over Amount A within Pillar 1.
Pillar one
The tax challenges that arise from the digitalization of the (global) economy are tackled by OECD’s Pillar One. Pillar One concerns the possible adjustment of the profit tax system and profit allocation. These rules affect multinationals with an annual turnover in excess of EUR 20 billion and a profitability of at least 10%. Based on the new allocation key, profits will be allocated to the market jurisdiction: the state where the products and services are used or purchased.
Amount A
Within Pillar one, Amount A (also known as “residual profit”) provides for a new taxing right.
The taxing right of Amount A applies to a portion of the residual profit of large and highly profitable enterprises for the benefit of jurisdictions in which goods or services are supplied or consumers are located (market jurisdictions).
Amount A operates as an overlay to the existing profit allocation rules, and therefore includes a mechanism to reconcile the respective different profit allocation systems and prevent double taxation.
The progress report
The report includes the building blocks of Amount A of Pillar one, but currently not all the rules have been included in this report. In October it is set for the rest of the rules to be implemented in the report[2]
[1] OECD (2022), Progress Report on Amount A of Pillar One, Two-Pillar Solution to the Tax Challenges of the Digitalisation of the Economy, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris, https://www.oecd.org/tax/beps/progress-report-on-amount-aof-pillar-one-july-2022.pdf
[2] OECD (2022), Progress Report on Amount A of Pillar One, Two-Pillar Solution to the Tax Challenges of the Digitalisation of the Economy, Chapter 1; Overview, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris, https://www.oecd.org/tax/beps/progress-report-on-amount-aof-pillar-one-july-2022.pdf
NAZALI TAX & LEGAL