BEPS 2.0 Understanding The Two-Pillar Framework

GENESIS

On October 8, 2021, over 135 member countries of the OECD/G20 Inclusive Framework (IF) on Base Erosion and Profit Shifting (BEPS), representing more than 95% of global GDP, agreed to a Two-pillar solution to reform international taxation rules. Each pillar is aimed to address a different gap in the existing rules that allow Multinational Enterprises (MNEs) to avoid paying taxes. The reform is targeted towards ensuring that MNEs pay a fair share of taxes wherever they operate and generate profits in today's digitalized and globalized economy.

Pillar One seeks to adapt the international income tax system to new business models through changes to the profit allocation and nexus rules applicable to business profits. The Pillar One expands the taxing rights of market jurisdictions by allocating a portion of their residual profit based on formulaic approach. Further, it aims to significantly improve tax certainty by introducing certain dispute prevention and