Proposed New Profit Allocation and Global Minimum Tax: OECD Agreement on the Two Pillar Solution and the Effect on Israel
A historic global statement has been signed by 132 members of the OECD Inclusion Framework (including Israel) which intends to bring fairness and stability to the international corporate tax framework and will lead to a complete reform of the international corporate tax system. The proposed reform is based on a Two Pillar Solution developed by the Inclusive Framework to address tax challenges arising from the digitalization of the economy. Pillar One of the proposal provides new nexus rules for the allocation of profits of a Multinational Enterprise (MNE) to countries where MNEs do business and where products and services are used and/ or consumed without having a physical presence. Pillar Two provides for a global minimum effective tax rate of at least 15 % for MNEs which will help to curb aggressive tax planning and stop the corporate tax “race to the bottom”.
