OECD's Global Minimum Tax and its Implementation in the EU - A Legal Analysis of Pillar Two in the Light of Tax Treaty and EU Law

Name: OECD's Global Minimum Tax and its Implementation in the EU - A Legal Analysis of Pillar Two in the Light of Tax Treaty and EU Law
Brand: Wolters Kluwer
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Valentin Bendlinger(Autor*in)

Wolters Kluwer (Verlag)

Erschienen am 17. Oktober 2023

582 Seiten

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Beschreibung

Rarely in the history of international tax law have there been so many evolutions in such a short space of time: In a dizzying array of reports, work programmes, consultations and announcements, the OECD, with the active support of the EU, has created a framework for a global minimum tax (Pillar Two or GloBE). In the meanwhile, jurisdictions are faced with the practical difficulties of incorporating an incredibly complex set of rules into their domestic legal systems. This book aims to shed light on the fundamental and technical issues surrounding the global minimum tax. It seeks to unravel the complex ramifications of GloBE's technical framework and aims to explore the relationship between the OECD's soft law materials, including the OECD's GloBE Model Rules and the GloBE Commentary, tax treaties and the EU's recently adopted GloBE-Directive.The author not only analyses Pillar Two from a technical and a policy perspective but also provides for a comprehensive examination of the compatibility of Pillar Two with tax treaties and EU law. To this end, the analysis also includes practical examples and illustrates solutions to numerous technical and policy issues of Pillar Two. Among the seminal matters covered are the following:History and Background of the global minimum tax discussion.Detailed technical considerations on the design of Pillar Two, including its scope, the determination of both the 'GloBE Income' as well as the 'Adjusted Covered Taxes' and the computation of the effective tax rate as well as the computation and collection of the final 'Top-up Tax' liability, including the application of the QDMTT, IIR, and UTPR.Tax policy implications and deficiencies of the final design of Pillar Two.The relation of Pillar Two to the current distribution of taxing rights under bilateral tax treaties. The analysis includes the compatibility of the QDMTT, IIR, and UTPR with existing tax treaties and the resolution of potential normative conflicts, both between tax treaties and domestic implementations of Pillar Two as well as between tax treaties concluded by EU Member States and the EU's GloBE-Directive.The role of the GloBE-Directive within the EU's legal order, including the issue of EU internal and external competence as well as the substantive compatibility of Pillar Two with primary law, such as the fundamental freedoms.Detailed comparisons between the OECD's GloBE Model Rules and the EU's GloBE-Directive elucidate common points and deviations. In addition to comprehensive technical considerations, the book also provides a comprehensive tax policy perspective on the global minimum tax. For its unparalleled clarification of the issues alone, this book will prove invaluable to practitioners, tax authorities, policymakers, and academics concerned with the implementation and application of Pillar Two.'Valentin Bendlinger's book is an outstandingly remarkable work on a highly complex topic. The structure, clarity of thinking, and legal argumentation are excellent, and the legal and policy results throughout are profoundly argued. The book successfully ties together broad concepts of international and European (tax) law with highly complex and novel issues of the taxation of multinational enterprises. It should be highlighted that Valentin Bendlinger succeeded in leading the reader from the history and policy through a &quote;jungle&quote; of unprecedented rules to overarching fundamental issues of how the new taxation framework is to be placed in the international and European legal order.' - Prof. DDr Georg Kofler, LLM (NYU), Vienna University of Economics and Business.

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Inhalt

Intro
Half-Title Page
Title Page
Copyright Page
Table of Contents
List of Figures
List of Tables
List of Abbreviations and Acronyms
Preface and Acknowledgements
CHAPTER 1 Introduction
CHAPTER 2 Procedure of the Examination and Methods Applied
2.1 Research Questions, Structure and Scope of the Thesis
2.2 The Thesis' Axioms
2.3 Legal Methods of Interpretation
CHAPTER 3 Background of Discussion Around a Minimum Tax Regime: From E-Commerce Via BEPS to the Pillars
3.1 E-Commerce and International Taxation: Ottawa Taxation Framework Conditions and Early Discussion of E-Commerce
3.2 The OECD/G20 and the BEPS-Project
3.3 From BEPS to the Pillars: The OECD's Two Pillar Approach to Address the Digital Economy that Rather Addresses All
3.4 Final Consensus: The GloBE Model Rules and Status Quo of Pillar Two Implementation
CHAPTER 4 The Technical Design of the GloBE Model Rules and Their Implementation in the GloBE-Directive
4.1 An Overview and an Assumption with Regard to the Interpretation of the GloBE-Directive
4.2 The Scope of GloBE
4.2.1 The 'MNE Group' as a Taxable Subject: Membership in an 'MNE Group' as a Prerequisite for Minimum Tax Liability
4.2.2 Requirement of Multinationality of an 'MNE Group' and EU Extension to 'Large-Scale Domestic Groups'
4.2.3 The 'Group' and Its Scope: The Relevance of 'Consolidated Financial Statements' and the 'Acceptable Financial Accounting Standards'
4.2.3.1 Structure of the Definition of the Term 'Group'
4.2.3.2 Group Membership Due to Inclusion in the 'Consolidated Financial Statements' of the UPE
4.2.3.3 Group Membership Despite Exclusion from the 'Consolidated Financial Statements' of the UPE
4.2.3.4 Extension of Scope to So-called Consolidated Entities or 'Partnership Groups: MNE Groups Consisting Exclusively of PEs
4.2.4 Membership Within an 'MNE Group'
4.2.4.1 The 'Constituent Entities'
4.2.4.1.1 The Individual 'Entities' Forming the 'Group'
4.2.4.1.2 Permanent Establishments Are 'Constituent Entities'
4.2.4.1.3 Being Subject to the GloBE Rules Without Being a 'Constituent Entity'?: The Special Status of Joint Ventures
4.2.4.2 The 'Ultimate Parent Entity'
4.2.4.2.1 Prerequisites for the Existence of an 'Ultimate Parent Entity'
4.2.4.2.2 Which Vehicles Do Qualify as an 'Entity'?: The Entity Test
4.2.4.2.3 Does the Vehicle Control Other Entities?: The Controlling Interest Test
4.2.4.2.4 Is the 'Entity' the Last One in the Ownership Chain?: The Ulimativity Test
4.2.4.2.5 Multiple UPEs Within a Single 'Group'?: The Special Case of 'Multi-Parented MNE Groups'
4.2.4.3 'Excluded Entities'
4.2.4.3.1 Conceptual Thoughts on 'Excluded Entities'
4.2.4.3.2 The Numerus Clausus of 'Excluded Entities'
4.2.4.3.3 Extension of the Definition of 'Excluded Entities' to Entities Directly Owned by an 'Excluded Entity'
4.2.4.3.4 Scope and Legal Consequence of Classification as an 'Excluded Entity'
4.2.4.4 The Territorial Allocation of Constituent Entities
4.2.4.4.1 The Fundamental Role of the Concept of 'Location' Within GloBE's Framework
4.2.4.4.2 The 'Location' of 'Entities'
4.2.4.4.3 The 'Location' of Permanent Establishments
4.2.4.4.4 Group Members Not Assigned to a Specific Jurisdiction: The Phenomenon of 'Stateless Constituent Entities'
4.2.5 Revenue Threshold of EUR 750 Million
4.2.5.1 Background and Connex to CbCR (BEPS Action 13)
4.2.5.2 Significance of Consolidated Revenues
4.2.5.3 Revenues of 'Excluded Entities' Remain in the Revenue Threshold
4.2.5.4 Timing Issues: Four-Year Perspective, the Relevance of 'Fiscal Years' and Currency Conversion
4.2.5.5 Special Issues with Regard to Group Mergers and Demergers
4.3 The Computation of the 'Effective Tax Rate'
4.3.1 The Fundamental Role of the 'Effective Tax Rate' Computation Within GloBE's Framework
4.3.2 Conceptual Thoughts on the ETR Computation
4.3.2.1 Development of and Tax Policy Considerations on the Computation of the ETR Within GloBE: A Bundle of Three Fundamental Tax Policy Decisions
4.3.2.1.1 First Decision: The ETR as a Fraction of Taxes Paid on Income Received
4.3.2.1.2 Second Decision: Tax Base and Tax Liability Determination at an Entity Level Based on the Financial Statements Prepared for Consolidation
4.3.2.1.3 Third Decision: The Choice of Jurisdictional Blending - Merits and Flaws of Blending Income Jurisdiction-Wise
4.3.2.2 The Technical Implementation of the ETR Computation Within GloBE
4.3.2.2.1 Structure of the Rules on the ETR Computation
4.3.2.2.2 The Technical Implementation of Jurisdictional ETR Calculation
4.3.2.2.3 Exceptions to Jurisdictional ETR Computation
4.3.2.3 Interim Conclusions: The Drawbacks of Jurisdictional ETR Determination
4.3.3 The GloBE Base: Computation of 'GloBE Income or Loss'
4.3.3.1 Preliminary Considerations on the GloBE Base and Structure of the Rules on Base Determination
4.3.3.2 Significance of Financial Accounts in the Determination of 'GloBE Income or Loss'
4.3.3.2.1 Financial Accounting Net Income or Loss Determined for Each Individual CE Before the Start of the Consolidation Process
4.3.3.2.2 Financial Accounting Standard Used to Determine CE's Income
4.3.3.2.3 What Is the Scope of Financial Accounting Net Income or Loss?
4.3.3.3 Adjustments to the GloBE Base
4.3.3.3.1 The Crux of Considering Permanent Differences Within the Framework of GloBE
4.3.3.3.2 Final Catalogue of Permanent Differences
4.3.3.3.3 Special Additional Adjustments Besides the Catalogue of Permanent Differences
4.3.3.3.4 Adjustments to Ensure Consistency with the Arm's Length Principle
4.3.3.3.5 Elections with Respect to Adjustments of Permanent Differences
4.3.3.4 Industry-Specific Carve-Out for Ship Operators: The Shipping Income Exclusion
4.3.3.5 Allocation of Income or Loss Between a Main Entity and a PE
4.3.3.6 Allocation of Income or Loss from a Flow-Through Entity
4.3.4 The Taxes Actually Paid: Computation of 'Adjusted Covered Taxes'
4.3.4.1 Preliminary Considerations on the Covered Taxes and the Structure of the 'Adjusted Covered Taxes' Computation
4.3.4.2 Current Tax Expense with Respect to 'Covered Taxes' in the Financial Accounts: The Definition of 'Covered Taxes' for the Purposes of GloBE
4.3.4.3 Additions to Covered Taxes
4.3.4.3.1 Covered Taxes Accrued as an Expense
4.3.4.3.2 GloBE Loss Election
4.3.4.3.3 Uncertain Tax Positions
4.3.4.3.4 Credit or Refund of Qualified Refundable Tax Credits
4.3.4.4 Reductions to Covered Taxes
4.3.4.4.1 Taxes with Respect to Excluded Income or Loss
4.3.4.4.2 Non-qualified Refundable Tax Credits
4.3.4.4.3 Refunded and Credited Tax Not Included Within Financial Accounts
4.3.4.4.4 Uncertain Tax Positions and Taxes Not Expected to Be Paid Within Three Years
4.3.4.5 The 'Total Deferred Tax Adjustment Amount' to Address Temporary Differences
4.3.4.5.1 The Crux of Considering Temporary Differences Within the Framework of GloBE
4.3.4.5.2 Deferred Tax Expense According to Financial Accounts as Starting Point for the 'Total Deferred Tax Adjustment Amount' and Recast to the Minimum Rate
4.3.4.5.3 Exclusions from the 'Total Deferred Tax Adjustment Amount'
4.3.4.5.4 Adjustments to the 'Total Deferred Tax Adjustment Amount'
4.3.4.5.5 Need to Recapture Deferred Tax Liability if Tax Is Not Paid Within Five Subsequent 'Fiscal Years' and Exception for 'Recapture Exception Accruals'
4.3.4.6 Increase or Decrease in 'Adjusted Covered Taxes'
4.3.4.7 'Top-up Tax' in Loss Situations: The Special Rule for 'Expected Adjusted Covered Taxes'
4.3.4.8 Allocation of Covered Taxes Between 'Constituent Entities'
4.3.4.8.1 Principles of Tax Allocation
4.3.4.8.2 Allocation of Taxes to a Permanent Establishment
4.3.4.8.3 Allocation of Taxes with Respect to 'Tax Transparent Entities'
4.3.4.8.4 Taxes Levied on CFC Profits
4.3.4.8.5 Tax Allocation with Respect to Hybrid Entities
4.3.4.8.6 Allocation of Taxes on Dividends and Other Distributions
4.3.4.9 Post-Filing Adjustments and Tax Rate Changes
4.4 Computation and Charging of the 'Top-up Tax'
4.4.1 The 'Top-up Tax' Computation: Linking the Jurisdictional ETR and the Final Minimum Tax Liability
4.4.2 Computation and Charging of 'Top-up Tax' as an Eight-Step Procedure
4.4.2.1 Step 1: Determination of CEs and Their 'Location'
4.4.2.2 Step 2: Aggregation of GloBE Income and Losses and Adjusted Covered Taxes per Jurisdiction
4.4.2.3 Step 3: ETR Calculation and Identification of Low Tax Jurisdictions
4.4.2.4 Step 4: Computation of the 'Top-up Tax' Percentage
4.4.2.5 Step 5: Excess Profits: The Substance-Based Income Exclusion
4.4.2.6 Step 6: Calculating the Jurisdictional 'Top-up Tax'
4.4.2.6.1 Overview
4.4.2.6.2 Additional (Current) Top-up Tax
4.4.2.6.3 The 'Qualified Domestic Minimum Top-up Tax' (QDMTT): Eliminating 'Jurisdictional Top-up Tax'
4.4.2.7 Step 7: Allocation of the 'Top-up Tax' to 'Constituent Entities'
4.4.2.8 Step 8: Charging the 'Top-up Tax': The GloBE Rules
4.4.2.8.1 Overview: Mechanisms and Rule Order
4.4.2.8.2 Income Inclusion Rule to Collect Pending 'Top-up Tax' at the Level of 'Parent Entities'
4.4.2.8.3 UTPR to Collect Remaining 'Top-Up Tax' by Formulary Apportionment to Entities Having 'Substance'
4.4.2.8.4 Transitional Rules for the Initial Phase of an MNE Group and Election to Delay Application of GloBE Rules
4.4.3 De Minimis Exception for Jurisdictional 'Top-up Tax' Computation
4.5 Conclusion: Eight Theses Resulting from the Technical Analysis of GloBE
4.5.1 GloBE Is to Be Applied in an Eight-Step Procedure
4.5.2 GloBE Establishes a Minimum Tax on 'Excess Profits'
4.5.3 GloBE Obliges to Collect 'Top-up Tax' Even in Loss Situations
4.5.4 GloBE Aggregates Taxes and Profits of Entities Located in the Same Jurisdictions
4.5.5 GloBE Allows Tax Revenues to Be Collected by Low-Tax Jurisdictions
4.5.6 GloBE from an Overall Perspective Might Reduce Tax Competition but Certainly Does Not Put an End to It
4.5.7 GloBE Shifts Tax Competition from Tax Laws to Accounting Standards, At Least to a Certain Extent
4.5.8 GloBE Reveals Not Only Technical Inconsistencies But Also Lacks Consistent Policy Goals
CHAPTER 5 The GloBE Model Rules and the GloBE-Directive and Their Relation to Tax Treaties and Other Sources of Public International Law
5.1 Overview: The Implementation of GloBE and Its Relation to the Pre-existing Landscape of International Tax Law
5.2 Potential Conflicts Between the Regulatory Framework of GloBE and Existing Tax Treaties
5.2.1 'Constituent Entities' as Covered Persons under Article 1 OECD MC
5.2.2 'Top-up Tax' as a Covered Tax under Article 2 OECD MC
5.2.3 GloBE and the Distribution of Taxing Rights
5.2.3.1 Basic Considerations on GloBE and the Distribution of Taxing Rights
5.2.3.2 The GloBE Rules and Their Relation to the Distributive Rule for Business Profits in Article 7 OECD MC
5.2.3.3 The GloBE Rules and Their Relation to the Distributive Rules of Articles 6, 8, 10 to 12 and 13 OECD MC
5.2.3.4 Interim Conclusion on the Relation of GloBE and the Distribution of Taxing Rights under Tax Treaties
5.2.4 The Relation of GloBE to Article 9 OECD MC
5.2.5 The Relation of GloBE to Non-Discrimination Pursuant to Article 24 OECD MC
5.2.6 Does the 'Saving Clause' Assure GloBE's Treaty Compatibility?
5.2.6.1 The Nature and Scope of the 'Saving Clause'
5.2.6.2 (In)compatibility of 'Top-up Tax' Imposed by Means of the IIR with the OECD MC
5.2.6.3 (In)compatibility of 'Top-up Tax' Imposed by Means of the UTPR with the OECD MC
5.3 Resolving Normative Conflicts Between GloBE and Tax Treaties from the Perspective of Public International and Domestic Law
5.4 Resolving Normative Conflicts Between the GloBE-Directive and Tax Treaties of the Member States
5.4.1 Overview
5.4.2 EU Law, Its Supremacy and Treaties Concluded by the Member States: A Clash of Legal Orders
5.4.3 Suspension/Subordination of Supremacy for Pre-existing Treaties under Article 351 TFEU
5.4.3.1 Telos and Purpose of Article 351 TFEU
5.4.3.2 Scope of Article 351 TFEU
5.4.3.3 Effect and Reach of Supremacy's Suspension According to Article 351(1) TFEU
5.4.3.4 Obligation to Eliminate Incompatibilities under Article 351(2) TFEU
5.4.3.5 Mutatis Mutandis Application of Article 351 TFEU on Subsequently Adopted Secondary Law?
5.4.4 Interim Conclusion
5.5 Are There Potential Conflicts Between GloBE and Customary International (Tax) Law?: UTPR and the 'Nexus' Debate
5.6 Conclusion: Does GloBE Implementation Require a Multilateral Agreement?
CHAPTER 6 The GloBE-Directive Within the EU's Legal Order
6.1 The GloBE-Directive Within the EU's Constitutional Framework: The Division of Competence Between the EU and Domestic Tax Legislatures
6.1.1 Implementation of GloBE Via a Legal Act of Secondary Law
6.1.2 The EUs Legal Competence to Implement GloBE Via a Legal Act of Secondary Law
6.1.2.1 Overview
6.1.2.2 General Considerations on the Union's Competence for Harmonization in the Area of Direct Taxation
6.1.2.2.1 Taxes and the EUs Internal Market Competences
6.1.2.2.2 The Framework of Internal Market Competences in a Historical Context
6.1.2.2.3 The Elusive Scope of Article 115 TFEU
6.1.2.2.4 Article 115 TFEU and Harmonization of Direct Taxation in a Post-BEPS Context
6.1.2.3 Article 115 TFEU as a Sufficient Legal Basis for the GloBE-Directive?
6.1.2.3.1 Methodological Caveats to the Examination of the EU's Competence to Implement GloBE
6.1.2.3.2 Prevention of Fragmentation of the Internal Market
6.1.2.3.3 Ensuring Compatibility with Fundamental Freedoms by a Common Framework
6.1.2.3.4 Legal Certainty by a Common Framework
6.1.2.3.5 Ensure Fair and Effective Taxation
6.1.2.3.6 Tackling Tax Avoidance, Tax Abuse and Aggressive Tax Planning
6.1.2.3.7 Setting a Limit to Tax Competition by Establishing a Minimum Tax Rate
6.1.2.3.8 Interim Conclusion
6.1.2.4 Article 116 TFEU: Could the Union Have Based the GloBE-Directive on Article 116 TFEU?
6.1.2.4.1 The Shadowy Existence of Article 116 TFEU and Its Consideration as a Potential 'Nuclear Option' for Future Direct Tax Harmonization
6.1.2.4.2 The Scope of Article 116 TFEU: What Is a 'Distortion' and When Is There a 'Need' for Its Elimination?
6.1.2.4.3 Would Article 116 TFEU Have Been a Sufficient Legal Basis for the GloBE-Directive and Might It Be a Suitable Option for Future Initiatives?
6.1.2.5 The Principles of Subsidiarity and Proportionality as Obstacles for the GloBE-Directive?
6.1.2.6 The 'Passerelle Clause' of Article 48(7) TEU: Alternative Approach to Enact or Amend Tax Related Legal Acts by Qualified Majority?
6.1.2.7 Interim Conclusion
6.1.3 External Competence of the EU to Implement GloBE Via International Agreements
6.1.3.1 Overview
6.1.3.2 The Thicket of the Union's External Competences
6.1.3.2.1 Article 216 TFEU: The Existence of Union's Competence to Conclude International Treaties
6.1.3.2.2 Article 3(2) TFEU: The Nature of Union's External Competence
6.1.3.2.3 The 'Creeping' Exclusivity and the 'Pre-emptive' Effects of International Agreements in Areas of Shared External Competence
6.1.3.3 Does the EU Have Power to Conclude GloBE-Related International Agreements?
6.1.3.3.1 General Discussion on the Union's External Competence in Direct Taxation
6.1.3.3.2 The Scope of Secondary Law in Direct Tax Matters Before the GloBE-Directive Was Adopted
6.1.3.3.3 The Effects of the GloBE-Directive on the External Competence of the Union
6.1.3.3.4 External Competence Without or Outside the Scope of the GloBE-Directive: Is GloBE 'Necessary to Attain One of the Objectives Referred to in the Treaties'?
6.1.3.4 Interim Conclusion
6.2 The GloBE-Directive and Its Relation to Primary Law
6.2.1 General Considerations on the Relation of Primary and Secondary EU Law
6.2.1.1 An Introductory Note on the Relation of Secondary to Primary EU Law and the Enforcement of Primary Law Incompatibilities of Secondary Law
6.2.1.2 The Standard of Review of Substantive Primary Law Incompatibilities: The Secondary Legislature's 'Broad Discretion'
6.2.1.3 The 'Shielding-Effect' of Secondary Law: The GloBE-Directive Protecting Domestic Laws from Primary Law Violations
6.2.2 Potential Conflicts Between the GloBE-Directive and the TFEU
6.2.2.1 The Relation of the GloBE-Directive and the Fundamental Freedoms
6.2.2.1.1 Some Preliminary Remarks on the Relation of GloBE and the Fundamental Freedoms
6.2.2.1.2 The IIR and the Fundamental Freedoms
6.2.2.1.3 The UTPR and the Fundamental Freedoms
6.2.2.1.4 Does the 'Initial Phase Relief' Pursuant to Article 49 GloBE-Directive Make a Difference with Respect to the GloBE-Directive's Compatibility with the Fundamental Freedoms?
6.2.2.2 GloBE and the Prohibition of State Aid
6.2.3 Interim Conclusions on the Primary Law Compatibility of the GloBE-Directive
6.3 The GloBE-Directive and Its Relation to Other Legal Acts of Secondary Law on Corporate Taxation Within the EU
6.4 Interim Conclusion: What Is the Impact of the GloBE-Directive on the EU's Legal (Tax) Order?
CHAPTER 7 Conclusions
Bibliography
OECD Reports and Policy Notes
Table of Cases
Table of Treaties and Models
Table of EU Official Documents and Reports of EU Institutions
Index

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