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Thailand has taken steps to align itself with global tax standards by approving a draft law to implement a 15% global minimum corporate tax.
This measure targets multinational corporations with annual global revenues exceeding €750 million, aiming to ensure fairer taxation and reduce profit-shifting to low-tax jurisdictions.
The global minimum tax is part of a broader effort spearheaded by the OECD to address base erosion and profit shifting (BEPS).
The aim is to ensure that large multinational enterprises (MNEs) pay a minimum level of tax regardless of where they operate. By implementing this measure, Thailand seeks to:
Thailand’s adoption of the 15% minimum tax reflects its commitment to global economic cooperation.
The reform aligns the country with over 140 jurisdictions that have pledged to implement the OECD’s tax framework.
While the reform is seen as a progressive step, it raises questions about its impact on Thailand’s investment attractiveness. Key considerations include:
Thailand’s approval of the global minimum corporate tax signals its dedication to modernizing its tax system and fostering international cooperation.
However, the measure’s success will depend on effective implementation and balancing revenue generation with maintaining investment appeal.
If you have any queries about this article on the global minimum tax, or tax matters in Thailand, then please get in touch.
Alternatively, if you are a tax adviser in Thailand and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
Country-by-Country Reporting (CbCR) is a tax transparency measure introduced by the OECD as part of its Base Erosion and Profit Shifting (BEPS) initiative.
CbCR requires large multinational companies to report detailed information about their operations, profits, and taxes paid in each country where they do business.
This information is then shared with tax authorities to help them detect tax avoidance practices, such as profit shifting to low-tax jurisdictions.
CbCR applies to multinational companies with global revenues of more than €750 million.
These companies must file an annual CbCR report that provides a breakdown of their income, profits, taxes paid, and other economic activities in each country where they operate.
For example, if a company has subsidiaries in 10 different countries, it must provide information on how much revenue each subsidiary earns, how much profit it makes, and how much tax it pays in each country.
This level of detail helps tax authorities identify where a company might be shifting profits to avoid taxes.
as introduced as part of the OECD’s effort to tackle tax avoidance by multinational companies.
Before CbCR, it was difficult for tax authorities to see the full picture of a company’s global operations.
By requiring companies to disclose their activities on a country-by-country basis, CbCR gives tax authorities the information they need to detect tax avoidance schemes.
This reporting helps ensure that multinational companies are paying their fair share of taxes in the countries where they actually do business, rather than shifting profits to tax havens.
Country-by-Country Reporting is a critical tool for improving tax transparency and combating tax avoidance.
By requiring large multinational companies to report detailed information about their global operations,
CbCR helps tax authorities ensure that companies are paying their fair share of taxes and operating in a fair and transparent manner.
If you have any queries about this article – What is country by country reporting? – then please do get in touch.
The OECD has published new technical guidelines to assist countries in implementing the global minimum corporate tax rate of 15%.
This initiative aims to ensure that multinational corporations contribute a fair share of taxes, regardless of where they operate.
The technical guidance addresses several challenges, including calculating effective tax rates, identifying low-tax jurisdictions, and handling cross-border complexities.
It also provides a framework for dispute resolution between nations.
The guidelines will require multinationals to reassess their tax strategies, particularly those involving low-tax jurisdictions.
Compliance costs are expected to rise, but the rules aim to create a more level playing field globally.
Countries with tax-friendly regimes may resist adopting these guidelines, fearing a loss of competitiveness.
Additionally, differing interpretations of the rules could lead to disputes between jurisdictions.
The OECD’s technical guidance is a significant step towards implementing a global minimum tax. While challenges remain, this initiative represents a milestone in international tax cooperation.
If you have any queries about this article on OECD’s global minimum tax guidelines, or tax matters in OECD member states, then please get in touch.
Alternatively, if you are a tax adviser in OECD member states and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
The Top-Up Tax is a key part of the OECD’s global tax reform, specifically under Pillar Two.
It is designed to ensure that multinational companies pay a minimum tax rate of 15% on their profits, even if they are operating in countries with lower tax rates.
The Top-Up Tax applies to profits that are taxed below the 15% threshold.
If a company is paying less than 15% tax in a particular country, the Top-Up Tax allows other countries to collect additional taxes to bring the total tax rate up to the minimum level.
Let’s say a company has a subsidiary in a country where the corporate tax rate is only 10%.
Under the Top-Up Tax rules, the company’s home country can impose an extra 5% tax on the profits earned in that country, making sure the company’s total tax rate meets the global minimum of 15%.
This system prevents companies from taking advantage of tax havens or countries with very low taxes, as they will always end up paying at least 15% on their profits, regardless of where those profits are earned.
The Top-Up Tax mainly affects large multinational companies with global revenues of more than €750 million.
Smaller companies that operate within one country are not impacted by this rule.
The tax is part of a broader effort by the OECD to reduce tax avoidance by multinational companies, which often shift their profits to low-tax jurisdictions to reduce their overall tax bills.
The Top-Up Tax is important because it helps create a fairer global tax system.
By ensuring that all large companies pay at least 15% tax on their profits, it reduces the incentive for companies to move their profits to tax havens or low-tax countries.
This tax reform is also expected to generate more revenue for governments, allowing them to fund important public services like healthcare, education, and infrastructure.
The Top-Up Tax is a powerful tool in the fight against tax avoidance.
By ensuring that multinational companies pay a minimum tax rate of 15%, it helps create a fairer tax system and ensures that countries can collect the tax revenue they need to support their economies.
If you have any queries about this article on What is the Top-Up Tax? – or other tax matters – then please do get in touch.
A non-cooperative tax jurisdiction is a country or territory that does not follow international tax transparency and information-sharing standards.
These jurisdictions often have low or no taxes and strict privacy laws, making them attractive to individuals and businesses looking to avoid or evade taxes in their home countries.
However, because these jurisdictions do not cooperate with international efforts to combat tax avoidance, they are often labelled as “non-cooperative” by organisations like the European Union (EU) and the Organisation for Economic Co-operation and Development (OECD).
Non-cooperative tax jurisdictions make it easier for individuals and businesses to hide their income and assets, reducing the amount of tax revenue that countries can collect.
This can lead to significant losses for governments, which depend on taxes to fund public services like healthcare, education, and infrastructure.
In addition, non-cooperative jurisdictions often allow companies to shift their profits to low-tax or no-tax countries, a practice known as profit shifting.
This deprives the countries where the profits were actually made of tax revenue, contributing to **base erosion**.
The **EU** and the **OECD** maintain lists of non-cooperative tax jurisdictions. These lists are based on criteria like:
Countries that do not meet these criteria may be placed on a black list or grey list of non-cooperative jurisdictions.
Countries and territories on these lists may face penalties or sanctions.
For example, businesses operating in or through non-cooperative jurisdictions may be subject to higher taxes or stricter reporting requirements in other countries.
In some cases, non-cooperative jurisdictions may also face restrictions on accessing international financial markets.
Non-cooperative tax jurisdictions contribute to global tax avoidance and profit shifting, depriving countries of much-needed revenue.
By identifying and penalising these jurisdictions, the EU and OECD aim to create a fairer global tax system where companies and individuals pay their fair share of taxes.
If you have any queries about this article or on international tax matters more generally, then please get in touch.
Kenya has taken a significant step toward adopting the OECD’s global tax standards by introducing a Minimum Top-Up Tax.
This new measure ensures that multinational companies operating in Kenya will pay a minimum tax of 15% on their profits, aligning Kenya with the OECD’s Pillar Two framework.
The OECD’s Pillar Two framework was designed to prevent large corporations from avoiding taxes by shifting profits to low-tax jurisdictions.
Under this framework, countries are encouraged to introduce a global minimum tax rate of 15%.
Kenya’s new Minimum Top-Up Tax will apply to multinational corporations operating in the country, ensuring that these companies are taxed at an effective rate of at least 15%.
If a company’s profits are taxed at a lower rate, the Kenyan government will impose a top-up to bring the effective rate to 15%.
The introduction of this tax is part of a broader global effort to ensure tax fairness and prevent profit shifting.
By ensuring that companies pay at least 15% in taxes, Kenya is joining other countries in trying to curb tax avoidance strategies that see profits moved to low-tax jurisdictions.
For Kenya, this is a significant move, as many multinational companies, particularly in the tech and financial sectors, operate within the country.
Large corporations operating in Kenya will need to carefully examine their tax structures to ensure compliance with the new rules.
Companies that have relied on tax incentives or reduced tax rates will now be subject to the Minimum Top-Up Tax, potentially increasing their overall tax liabilities.
More information about Kenya’s implementation of the Minimum Top-Up Tax can be found through the Kenya Revenue Authority here.
Kenya’s decision to adopt the Minimum Top-Up Tax aligns the country with global tax standards and demonstrates its commitment to tax fairness.
This move is expected to generate additional revenue for the country while reducing the risk of tax avoidance by multinational corporations.
If you have any queries about this article on the Kenya Minimum Top-Up Tax, or tax matters in Kenya, then please get in touch.
Alternatively, if you are a tax adviser in Kenya and would be interested in sharing your knowledge and becoming a tax native, then please get in touch. There is more information on membership here.
The US Congress is set to reconvene to discuss key international tax policies, including the future of the Global Intangible Low-Taxed Income (GILTI) regime and its alignment with the OECD’s Pillar Two framework.
These discussions are expected to have a significant impact on multinational corporations that have operations abroad.
The Global Intangible Low-Taxed Income (GILTI) regime was introduced as part of the Tax Cuts and Jobs Act 2017 to prevent companies from shifting profits to low-tax jurisdictions.
Under GILTI, US multinationals must pay a minimum tax on their foreign income, even if that income is earned in countries with lower tax rates.
However, with the OECD’s Pillar Two framework setting a global minimum tax rate of 15%, the US Congress will need to decide whether to align GILTI with these new global standards.
During the upcoming session, Congress will focus on:
The decisions made during these discussions will have far-reaching consequences for US companies that operate abroad. If the GILTI regime is brought in line with OECD standards, some companies could see their tax liabilities increase. At the same time, aligning with global standards is essential for maintaining the US’s position in the international tax landscape.
The US Congress’s upcoming discussions on GILTI and international tax reform will shape the future of cross-border taxation for American companies.
These talks are part of a broader global trend towards ensuring that all companies pay a fair share of tax on their global profits.
If you have any queries about this article on GILTI or tax matters in the US, then please get in touch.
Alternatively, if you are a tax adviser in the US and would be interested in sharing your knowledge and becoming a tax native, then please get in touch. There is more information on membership here.
Pillar Two is the second part of the OECD’s global tax reform, and its main goal is to introduce a global minimum tax rate for large multinational companies.
This helps prevent companies from shifting their profits to low-tax jurisdictions, commonly known as tax havens, to avoid paying taxes.
Pillar Two introduces a global minimum tax rate of 15%.
This means that even if a company is based in a country with a tax rate lower than 15%, other countries where the company operates can “top up” the tax to ensure that the company pays at least 15% on its profits.
The global minimum tax is designed to stop companies from using tax havens to avoid paying taxes.
By ensuring that all large companies pay a minimum level of tax, the OECD hopes to create a fairer global tax system.
Under Pillar Two, countries can introduce a Top-Up Tax, which ensures that companies with subsidiaries in low-tax countries pay additional taxes to bring their total tax rate up to 15%.
The Income Inclusion Rule (IIR) allows parent companies to pay extra tax on the income of their foreign subsidiaries if those subsidiaries are taxed below the global minimum rate.
Pillar Two is a major development in the fight against tax avoidance.
By introducing a global minimum tax rate, it ensures that companies can’t take advantage of tax havens to avoid paying taxes.
This creates a more level playing field for countries and helps them collect the tax revenues they need to fund public services.
If you have any queries about this article – What is the OECD’s Pillar Two – then please don’t hesitate to get in touch.
A participation exemption is a key tax mechanism designed to avoid double taxation on income earned from foreign subsidiaries.
It allows companies to receive dividends from their foreign investments without being taxed again in the home country.
This exemption is an attractive feature for businesses with a multinational presence, as it encourages cross-border investments while eliminating the risk of double taxation.
Ireland, already known for its business-friendly tax environment, is introducing a new participation exemption as part of its tax reforms.
This is expected to enhance its appeal to multinational companies and investors looking for efficient tax structures within the EU.
Ireland’s low corporate tax rate of 12.5% has long made it a popular choice for multinationals.
Now, with the introduction of a participation exemption, Ireland is aligning itself with other European countries that already offer similar incentives.
The exemption allows Irish-based companies to receive dividends and capital gains from foreign subsidiaries without paying additional tax in Ireland, provided the subsidiary meets certain conditions.
These conditions generally require the subsidiary to be based in a country with which Ireland has a tax treaty and for the Irish company to hold at least a 5% ownership stake in the subsidiary.
This is particularly advantageous for companies looking to repatriate profits from their overseas operations, as they can now do so without incurring a tax burden in Ireland.
The new participation exemption applies under specific conditions, as follows:
This new rule makes Ireland a more attractive location for holding companies that manage international subsidiaries, further boosting its competitiveness in the global tax landscape.
Ireland’s participation exemption is expected to attract even more foreign direct investment, particularly from multinationals looking for an efficient tax regime within the EU.
By eliminating the risk of double taxation on foreign earnings, Ireland offers a compelling proposition for companies with global operations.
Furthermore, this new tax policy could encourage companies to restructure their international holdings to take advantage of Ireland’s favourable tax regime.
As many businesses seek alternatives to the UK post-Brexit, Ireland’s new participation exemption strengthens its position as a key financial hub within the EU.
While the participation exemption is a welcome addition to Ireland’s tax policies, it will need to be balanced with the global trend towards higher corporate tax transparency and compliance.
For instance, the OECD’s Pillar 2 of the Base Erosion and Profit Shifting (BEPS) initiative introduces a global minimum tax of 15%, which could limit the effectiveness of Ireland’s low-tax regime.
Moreover, Ireland’s tax policies have been scrutinised by the European Union in the past, especially regarding state aid and preferential treatment of multinationals.
The participation exemption, while beneficial, will need to comply with these international regulations.
Ireland’s introduction of a participation exemption is a strategic move that will likely increase its appeal as a destination for multinational companies.
By offering a tax-efficient way to manage foreign earnings, Ireland positions itself as a leading hub for international investments.
However, companies will need to ensure that they remain compliant with evolving global tax standards while taking advantage of this new opportunity.
For more information about Ireland Progresses New Participation Exemption, or Irish tax matters more generally, then please get in touch.