Global Minimum Tax

Global minimum tax is a tax policy proposal part of Pillar Two BEPS Initiatives.

Under Global Minimum Tax large multinational corporations will be required to pay a minimum tax rate of 15% on their profits, regardless of where they are located. Essentially, the idea is to ensure that multinational companies pay a minimum amount of tax in all countries in which they operate, thus preventing them from shifting profits to no tax or low-tax jurisdictions.

As one of the most discussed topics, the Global Minimum Tax is one of the largest tax reforms as part of the initiative under Pillar 2 of the Base Erosion Profit-Shifting (“BEPS”) 2.0 project. It subjects multinational companies, with an annual revenue of more than EUR 750 million in minimum 2 out of the past 4 fiscal years, a minimum tax rate of 15% regardless of their location.

The Pillar 2 Model Rules, also known as Global Anti-Base Erosion (“GloBE”) Rules, were released by the OECD on 20 December 2021 to end the competition between countries to offer the lowest possible corporation tax rates to attract foreign investments by subjecting multinational groups around the world to a global minimum tax of 15%. Read IRAS updates on GloBE Rules and Domestic Top-Up Tax (DTT).

What is the key impact of Global Minimum Tax?

Increased Tax Revenue: A global minimum tax would raise the effective tax rate of multinational companies that have been able to reduce their tax bills by shifting profits to low-tax jurisdictions.
Level Playing Field: A global minimum tax would level the playing field for businesses of all sizes and countries. This would reduce the incentive for companies to move profits to low-tax countries, and would also reduce incentives for countries to engage in a “race to the bottom” to attract multinational companies.
A global minimum tax is expected to reduce (at least in theory) amount of tax avoidance and evasion, as well as the perception of unfairness that arises when large multinational corporations are able to significantly reduce their tax bills.
Reduced Double Taxation: A global minimum tax could help to reduce double taxation of corporate profits. Currently, multinational companies may be subject to taxes in multiple countries, resulting in double taxation of the same income. A global minimum tax could help to avoid this problem.

Implementation of Global Minimum Tax in the region

Whilst several countries such as Australia, South Korea, Japan, and Vietnam have commenced the implementation of GMT as of 1 January 2024, other countries such as Malaysia, Singapore, Thailand, and Hong Kong are expected to implement the rules from 1 January 2025 onwards.

What is the impact for taxpayers?

Taxpayers will need to consider the following:

Whether your company is within the scope of Global Minimum Tax
Perform a preliminary assessment to determine if a top up tax is likely to be applicable
Determine in which countries is the company required to pay top up tax
Compute the global minimum tax provision for the first year of implementation of global minimum tax

How we can help.

Transfer Pricing Solutions Asia offers comprehensive support for multinational corporations facing the challenges of Global Minimum Tax (GMT). Our technical capabilities include conducting risk assessments, calculating provisions, preparing reports and documentation, ensuring compliance with BEPS 2.0 Pillar Two rules, and developing tax planning strategies. With our expertise and commitment to excellence, we help clients navigate the complexities of global tax regulations and optimise their tax positions.

Global Minimum Tax Risk Assessement

Our team conducts a comprehensive assessment of your company's risk exposure to global minimum tax regulations. We analyze your current tax practices and identify areas that may pose risks or require adjustments to comply with the new rules.

Global Minimum Tax Calculation

We assist in calculating the global minimum tax provision for your company, ensuring accuracy and compliance with the regulations. Our experts use sophisticated software and methodologies to calculate the provision based on your company's financial data and applicable tax rates.

Global Minimum Tax Reporting and Documentation

We help prepare the necessary reports and documentation required for compliance with global minimum tax regulations. Our team ensures that all documentation is accurate, complete, and filed on time to avoid penalties.

Compliance with BEPS 2.0 Pillar Two Rules

We provide guidance and support to ensure your company complies with the BEPS 2.0 Pillar Two rules related to global minimum tax. Our experts stay up-to-date with the latest regulations and advise on how to adjust your tax practices to comply with the new rules.

Tax Planning & Optimisation Strategies

We develop customised tax planning and optimisation strategies to help minimise your company's global minimum tax liability. Our experts identify opportunities for tax savings and provide recommendations on how to structure your operations to achieve the best tax outcomes.

Global Minimum Tax

With our expertise and commitment to excellence, we help clients navigate the complexities of global tax regulations and optimise their tax positions.