The OECD's Two-Pillar Solution: Reshaping International Taxation For The Digital Age

The OECD's comprehensive two-pillar solution is designed to reform international tax rules and address the tax challenges arising from globalization and digitalization.

Pillar 1: Profit allocation to market jurisdictions

Pillar 1 targets around 100 of the largest and most profitable multinational enterprises (MNEs), encompassing those with gross revenues exceeding ?20 billion and profitability surpassing 10 per cent. Its primary objective is to allocate profits to the countries where these MNEs generate revenue and serve their customers, referred to as "market" jurisdictions.

The framework also incorporates safe harbor rules for sales and marketing activities and mandates the removal of digital services taxes and other relevant measures by participating countries. Utilizing a revenue-based allocation key, Pillar 1 allows for taxation in market jurisdictions regardless of an MNE's physical presence in that jurisdiction, relying on the transaction between the MNE