Addressing the tax challenges arising from the digitalization of the economy has been a top priority of the OECD since 2015. In January 2019, the OECD agreed to examine proposals in two pillars. Pillar One is focused on nexus and profit allocation whereas Pillar Two is focused on global minimum tax. In July 2020 the OECD was mandated to produce reports on the Blueprints of Pillar One and Pillar Two by October 2020.
According to the OECD, in an increasingly digital age, businesses are able to generate profits through participation in the economic life of a jurisdiction with or without the benefit of a local physical presence, and this should be reflected in the design of nexus rules. The Pillar One Blueprint proposes to allocate a portion of residual profit of in-scope businesses to market or user jurisdictions (“Amount A”) generally without regard to physical presence.
Continue Reading Tax Challenges Arising from Digitalisation, Report on the OECD’s Pillar One Blueprint: Executive Summary