OECD launches public consultation on the tax challenges of digitalisation with the release of a first building block under pillar one

In October 2021, over 135 members of OECD/G20 Inclusive Framework reached an agreement on BEPS to a two-pillar solution addressing the tax challenges arising from the imminent digitalization and globalization of the world economy. The work on the two-pillar plan is well underway now with the OECD launching public consultation with the release of the first building block under pillar one.

PILLAR ONE

The OECD/G20 Inclusive Framework is launching a stage-wise public consultation. The secretariat working documents would be released on each building block to obtain quick feedback before the work is finalized. The organization has decided to take this approach instead of taking the long-drawn approach of waiting for the comprehensive document to be ready before any stakeholder consultation. This will allow the organization to work in parallel with the consultation and adhere to the tight political timetable agreed to on October 2021.

Amount A

On fourth February 2022, the first building block was released for public comment. While the Draft Rules for Nexus and Revenue Sourcing have been agreed for the release to obtain public comments, the draft rules do not reflect the consensus over the substance of the document. Interested stakeholders can send their written comments by 18th February 2022.

Amount B

For amount B of pillar one, a public consultation document would be issued by mid-2022 with a public comment and consultation period to follow.

PILLAR TWO

The pillar two model rules released in December 2021, provide a template for domestic implementation of the GloBE rules. The rules would come alongside a commentary providing guidance on the application and implementation of these new rules for the taxpayers and tax administrations. They will draw input from a business advisory group set up by BAIC.

An implementation framework is being developed for facilitating a smooth and coordinated implementation of GloBE rules that will address issues. In February, a public consultation would be launched with a consultation event planned for March.

For more information on the 2 Pillar policy read further on the OECD website for the 2 Pillar plan