Following a joint statement from G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) released over the weekend, it appears that the US Government will remove Section 899 from the “One Big Beautiful Bill” in exchange for concessions provided by the other G7 territories on the OECD’s Pillar II Global Minimum Tax.
It appears that the Pillar 2 proposed amendments would involve the following:
- Exclude U.S. parented groups from the Income Inclusion Rule (IIR); and
- Exclude all US entities from the Undertaxed Profits Rule (UTPR).
It appears that a Qualified Domestic Minimum Top-up Tax (QDMTT) would remain in place in the respective territories, although careful consideration will need to be given to the updated rules that will be issued following the G7 statement. Hence a Pillar 2 compliance burden still exists for all Multinationals, though the amount of additional Top-up Tax will significantly reduce in many cases for US Groups.
The updated proposals would mean that multinational groups would be spared from higher taxes following the removal of Section 899. These changes should also remove a major source of uncertainty for many non US based multinationals. At this stage, however, it appears that an IIR and UTPR would still apply to non US parented groups and non US companies.
These changes need to be agreed by other countries in the Inclusive Framework in addition to the G7 if they are to apply globally.
Irish experts warn, that US tax workaround could harm EU firms, as they could face a competitive disadvantage if the US is given permanent exemptions.
