Tax updates: BEPS 2.0

The past week ended with historical events for the tax system of the whole world. On Saturday, June 5, this year, after years of negotiations and discussions, the ministers of finance of G7 and key international organizations agreed to begin global tax reform. Its necessity is dictated by the continuous globalization and digitalization of the world economy.

First of all, the reform will be pointed at companies operating in the global digital economy. Their business model, due to the high variety of the global "tax space" and the specifics of the technological business, allows paying taxes not where the activity is carried out and the cost is generated, but mainly in the country of registration (or leaving them in tax "harbors").

It is assumed that the reform will consist of two key components - "Pillar One" and "Pillar Two."

For example, within Pillar One, the largest and most profitable transnational corporations will have to pay tax not only in countries where they are registered and have a head office but in countries where they actually operate and generate value as well. The rules will apply to international companies with profitability of at least 10%. At the same time, 20% of any additional profits that will lead to an increase in profitability should be redistributed and taxable in those countries where such companies operate.

Therefore, within Pillar Two, the minimum corporate tax rate for transnational corporations is set at 15%, which should prevent the "flow" of profits to offshore jurisdictions and stop tax "races" between countries.

The next step in introducing new global tax standards should be their support during a meeting of G20 finance ministers and central bank executives in July this year. And we understand that given the agreed position of Great Britain, Germany, Italy, Canada, USA, France, Japan, EU (Eurogroup), and the OECD, this is inevitable.