Part 3Multinational top-up tax

Chapter 10Definitions etc

Miscellaneous

255Pillar Two rules

1

In this Part references to the “Pillar Two rules” are to the Pillar Two model rules as interpreted in accordance with, and supplemented by—

a

the Pillar Two commentary, and

b

any further commentaries or guidance published from time to time by the OECD that are relevant to the implementation of the Pillar Two model rules.

2

In subsection (1)—

  • “Pillar Two model rules” means the model rules published by the Organisation for Economic Co-operation and Development as “Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two): Inclusive Framework on BEPS”;

  • “Pillar Two commentary” means the following—

    1. a

      the commentary on the Pillar Two model rules published by the Organisation for Economic Co-operation and Development as “Tax Challenges Arising from the Digitalisation of the Economy – Commentary to the Global Anti-Base Erosion Model Rules (Pillar Two)”, and

    2. b

      the examples illustrating the application of the Pillar Two model rules published by the Organisation for Economic Co-operation and Development as “Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two) Examples”.

F12A

Pillar Two rules apply to a member of a multinational group (“the relevant member”) in an accounting period if conditions A, B and C are met.

3

F2Condition A is met if—

a

the group is a qualifying multinational group F3for the accounting period, or

b

the group would be a qualifying multinational group F4for the accounting period but is not only as a result of Condition B in section 129(3) (requirement that at least one member located in the United Kingdom).

F54

Condition B is that—

a

the ultimate parent is subject to Pillar Two IIR tax for the accounting period and is not located in the same territory as the relevant member,

b

an intermediate parent member of the group is subject to Pillar Two IIR tax for the accounting period, is not located in the same territory as the relevant member and has an ownership interest in—

i

the relevant member, or

ii

a member of the group located in the same territory as the relevant member, or

c

any member of the group is located in a territory in which a qualifying undertaxed profits tax is in force for the accounting period.

5

Condition C is that no transitional safe harbour election applies to the relevant member for that period.

6

For the purposes of this Part “transitional safe harbour election” means—

a

an election under paragraph 3(1) (transitional safe harbour), or

b

an election corresponding to that election for the purposes of a tax imposed by a Pillar Two territory that is equivalent to multinational top-up tax so far as it relates to top-up tax under the IIR (within the meaning of the Pillar Two rules).