Global Tax Deal: Outcome Statement

138 countries and jurisdictions, representing over 90% of the global GDP, agreed on an Outcome Statement following 20 months of intense technical negotiations by delegates to continue the work to implement the Two Pillar Solution of the BEPS initiative.

Global Tax Deal: Outcome Statement

Over 90% of the world's GDP, or 138 members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), agreed on an outcome statement acknowledging the tremendous progress made and enabling nations and regions to proceed with historic, significant reform of the international tax system. Regarding the world's biggest multinational enterprises (MNEs), a more equitable allocation of profits and taxation rights across nations and jurisdictions will be guaranteed by the Two-Pillar Solution to Address the Tax Challenges Resulting from the Digitalization of the Economy.

After two years of intense technical negotiations, delegates reached an agreement at the 15th Meeting of the Inclusive Framework to continue the work toward implementing the Two Pillar Solution. It displays the cooperation and compromise that all jurisdictions—big and small, developing and developed—have shown during the discussions that the members of the Inclusive Framework have been holding since October 2021.

The package of deliverables created by the Inclusive Framework to address the remaining components of the Two-Pillar Solution is summed up in the Outcome Statement:

  • A Multilateral Convention (MLC) text created by the Inclusive Framework that permits countries to reallocate and use their domestic taxing authority over a fraction of residual profits from multinational enterprises (Amount A of Pillar One). A few jurisdictions have voiced concerns about certain specific items in the MLC, so the Inclusive Framework will publish the text of the MLC once it is ready for signature after a few particular issues are resolved;
  • A suggested framework (Amount B of Pillar One) for the streamlined and simplified application of the arm's length principle to in-country baseline marketing and distribution activities, where stakeholders are consulted on specific aspects before finalization;
  • The implementation framework of the Subject-to-Tax Rule (STTR) will allow developing nations to amend bilateral tax treaties to "tax back" income on specific intra-group revenue when that income is subject to minimal or no taxation in the other jurisdiction;
  • The Organization for Economic Cooperation and Development (OECD) will draft a thorough action plan to facilitate the prompt and well-coordinated implementation of the Two-Pillar Solution in collaboration with regional and global organizations.

Significantly, since October 2021, 138 nations and jurisdictions have also concurred in the Outcome Statement to forgo imposing newly enacted digital services taxes or comparable measures on any company until December 31, 2024, or, if earlier, the MLC's entry into force, provided that the MLC's signature has advanced sufficiently by year's end. This pledge is given in appreciation of the strides achieved thus far and the urgency of avoiding any obstacles or postponements to the MLC's ratification process.

Read more here.