The Organization for Economic Co-operation and Development (OECD) Two pillar solution will have a high impact on the Gulf Cooperation Council (GCC) and result in significant tax policy changes and reforms across the region. Under Pillar 2/Global Minimum Tax (GMT) low taxed profits of multinational enterprises (MNEs) are subject to a minimum tax of 15%. To enforce the GMT, the OECD/G20 Inclusive Framework on BEPS (IF) has proposed a set of rules which have been agreed by 137 countries, including the United Arab Emirates (UAE), the Kingdom of Saudi Arabia (KSA), Qatar, Bahrain, and Oman.
On 20 December 2021, the OECD/IF published the model rules for the application of the GMT detailing the purpose and operation of the rules. These model rules will have to be introduced into domestic legislation of the countries that decide to implement the GMT.
According to the implementation plan, the GMT will take effect from 1 January 2023. The time to start preparing is now.
In light of the above, as part of our series of webinars in relation to the GMT, we hosted a second session on Wednesday, 17 January 2022, where we briefed the audience on the model rules and how they will operate from a practical point of view. Our team of tax experts covered the following topics:
- Relevant changes from the Pillar Two blueprint and their impact
- Operation and mechanics of the rules, focusing on the income inclusion rule (IIR), switch-over-rule (SOR) and undertaxed payment rule (UTPR)
- Other key provisions, obligations and potential compliance requirements
- Potential country responses and trends
- Key considerations for UAE/GCC based entities