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Will Ireland Compromise on the Global Minimum Tax Deal?

6th October 2021

Will Ireland Compromise on the Global Minimum Tax Deal?

It can’t be easy being Irish Finance Minister Paschal Donohoe these days. With the countdown to reach a global minimum tax rate agreement at the end of the month—and Ireland being one of the more stubborn EU holdouts—the pressure is on. Right now, the proposed global minimum tax rate stands at “at least 15%,” and Donohoe has said, it’s the “at least” part with which Ireland is struggling. Ireland’s corporate tax rate is an incentivizingly low 12.5%, and that “at least” language threatens that Ireland could be forced to tax businesses at a rate that is “significantly higher.” Still, Donohoe isn’t unreasonable. He claims, with more “certainty and stability,” Ireland would likely enter the agreement. Earlier this week he was headed to Brussels to continue tax discussions with Margrethe Vestager, the European Competition Commissioner. While we know there will be talks, but whether there will there be compromise is anybody’s guess. 

 What Are Countries Negotiating for the Global Tax Plan? 

It’s no secret that global tax talks on Pillar 1 and Pillar 2 are coming down to the wire. What still needs to be negotiated? Let’s start with Pillar One. Of course, this proposal reallocates a percentage of profits, above a 10% margin, incurred by the world’s biggest companies. The question is, what is that percentage? In July, governments agreed to between 20 and 30%, but since, developing countries from the G24 have pleaded for “not less than 30%.” France proposed meeting in the middle at 25%, but so far, there is no definitive consensus. Another complication? Unilateral digital services taxes—will they be rolled back? How? When? In terms of the global minimum tax proposal, known of course as Pillar Two, countries still need to decide on a global minimum tax rate. “At least 15%,” as the proposal stands now, is ambiguous enough to have important EU players like Ireland hold off in fear of a corporate tax rate so steep, it would leave little room for incentivizing businesses. Pillar Two’s minimum tax rate isn’t the only to-be-determined piece of the puzzle, carve-outs—as in, which businesses/industries are exempt from the global tax deal?— and substance-based carve-outs, essentially tax deductions based on a percentage of employee compensation and tangible assets, are also on the table. The common denominator for all countries involved, is obviously, change, but global rewrites promise to impact each country uniquely, which makes negotiations complicated. On October 8, the 140 countries that make up the Inclusive Framework will try to hammer out those last details, before the G20 signs off at the end of the month, at a leaders summit in Rome.   

Jordan Issues New Transfer Pricing Documentation Requirements 

Taxpayers with operations in Jordan would be wise to evaluate their transfer pricing policies and ensure that all intercompany transactions are documented. That’s right—we said documented. Back in June, in the official gazette, Jordan issued transfer pricing documentation requirements—and last week, the Jordan Ministry of Finance delivered the full range of details. What does the tax administration want to see from multinational companies? For taxpayers with related-party transactions exceeding 500K Jordanian dinar (approximately $705K) in a 12-month period, tax authorities expect companies to comply with the OECD’s three-tier documentation regime: a master file, a local file, and a country-by-country report, if applicable. These documents not only need to be prepared, but they need to be submitted to tax authorities within 12 months after the fiscal year end. A disclosure form, as part of the annual tax return, is also required.