On 18 February 2022, the Secretariat of the Organisation for Economic Co-operation and Development (OECD) released a public consultation document with draft rules for tax base determinations under Amount A for Pillar One of the OECD/G20 project on Addressing the Tax Challenges Arising from the Digitalisation of the Economy (the so-called BEPS 2.0 project).
Pillar One involves the development of new nexus and profit allocation rules that assign a greater share of the taxing rights over global business profits to the market jurisdictions. This is done through a formulaic approach, by first determining the global profits of the group and then allocating a portion of these profits to the market jurisdictions by using a revenue-based formula. The tax base determines the total profits of a group to which the formula will be applied. The starting point for this determination is the consolidated group financial accounts. The draft rules provide specifics on the calculation of the tax base, including book-to-tax adjustments, treatment of restatements, carryforward of losses and taking into account changes in the group structure.
Source EY
