AICPA - American Institute of Certified Public Accountants
10/08/2024 | Press release | Distributed by Public on 10/09/2024 08:23
AICPA Submits Comments Regarding “Once Out, Always Out” Pillar 2 Rule
AICPA Submits Comments Regarding "Once Out, Always Out" Pillar 2 Rule
Washington, D.C. (October 8, 2024) The Association of International Certified Professional Accountants (Association) sent comments to the Organisation for Economic Co-operation and Development (OECD) Center for Tax Policy and Administration requesting clarification on the Transitional Country-by-Country Reporting (CbCR) Safe Harbour for non-implementing jurisdictions in 2024 under Global Anti-Base Erosion Model rules (GloBE), also known as Pillar 2.
In its letter, the Association recommends the OECD clarify that a Multinational Enterprise group (MNE Group) is only required to meet the Transitional CbCR Safe Harbour for a jurisdiction once that jurisdiction is subject to one of the Pillar 2 charging mechanisms under the "once out, always out" approach.
The stated purpose of the Transitional CbCR Safe Harbour is to minimize compliance burdens for jurisdictions that are at a low risk of owing a potential top-up tax. Further, the rationale underlying the "once out, always out" rule is that an MNE Group that is required to perform the detailed GloBE calculations for a jurisdiction in a year is not disadvantaged by having to perform those calculations again in a later year. Requiring MNE Groups to meet the Safe Harbour for a jurisdiction that is not yet subject to a top-up tax undercuts both principles.
The December 2022 administrative guidance issued by the OECD included a specific footnote clarifying when a jurisdiction comes within the scope of the Pillar 2 rules, specifically when it's subject to one of the three Pillar 2 taxes - IIR (income inclusion rule), UTPR (undertaxed profits rule), or QDMTT (qualified domestic minimum top-up tax).
This footnote arguably provided some clarity for MNE Groups on this point, suggesting that the Safe Harbours were only relevant when a specific jurisdiction was subject to a top-up tax. However, the OECD subsequently released its "Consolidated Commentary" in April 2024 which omitted this crucial footnote, introducing further ambiguity for MNE Groups.
"Our recommendations are aimed at ensuring clarity and fairness in the application of the GloBE rules," says Reema Patel, senior manager, AICPA Tax Policy & Advocacy. "This will ensure that MNE Groups do not face unintended compliance burdens or exclusion from transitional relief in subsequent years."
About AICPA & CIMA, together as the Association of International Certified Professional Accountants
AICPA & CIMA, together as the Association of International Certified Professional Accountants (the Association), advance the global accounting and finance profession through our work on behalf of 597,000 AICPA and CIMA members, candidates and registrants in 188 countries and territories. Together, we are the worldwide leader on public and management accounting issues through advocacy, support for the CPA license, the CGMA designation and specialized credentials, professional education and thought leadership. We build trust by empowering our members, candidates and registrants with the knowledge and opportunities to be leaders in broadening prosperity for a more inclusive, sustainable and resilient future.
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BACKGROUND:
December 11, 2023:Comments on Draft Organisation for Economic Co-operation and Development OECD/G20 Inclusive Framework Pillar One Multilateral Convention Text
December 2, 2019: Public Consultation Document - Global Anti-Base Erosion Proposal ("GloBE") - Pillar Two
November 11, 2019:Public Consultation Document - Secretariat Proposal for a "Unified Approach" under Pillar One
May 28, 2019: "Comments on the OECD Public Consultation Addressing the Tax Challenges of the Digitalisation of the Economy,"
Contact: Veronica L. Vera
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