Multilateral Instrument to Implement Subject to Tax Rule Open for Signature

On 3 October 2023, the OECD announced that the OECD/G20 Inclusive Framework on BEPS has recently completed negotiations on a multilateral instrument that is designed to protect the taxing rights of developing countries by ensuring that multinational corporations pay a minimum corporate tax on a wide range of cross-border transactions within their corporate groups, including payments for services.

The Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule is a fundamental component of the Two-Pillar Solution that addresses the tax challenges arising from the digitalization of the global economy. Currently open for signatures, this Multilateral Convention will facilitate the swift implementation of the subject-to-tax rule (STTR), which was developed as part of the two-pillar solution under Action 1 of the BEPS project.

The STTR is a treaty-based regulation that extends eligibility to over 70 developing members within the Inclusive Framework. These eligible members can formally request the incorporation of the STTR into their existing tax treaties. Specifically, this inclusion applies to tax treaties with Inclusive Framework Members that impose a nominal corporate income tax rate below the 9% threshold.

The OECD will act as the custodian of this multilateral instrument, providing essential support to governments during the signature and ratification process. The OECD is also actively developing a comprehensive action plan to facilitate the rapid and coordinated implementation of Pillar Two. This plan includes the provision of additional support and technical guidance to enhance implementation capacity, with a particular focus on assisting developing nations.

Find out more about BEPS 2.0    

For more information on the BEPS tax framework or other corporate international tax matters, please Contact Us, or email Chris Denning or Chris Danes from our International Tax team, who will be happy to assist.

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