Much of the focus of this month’s international developments is given to the agreement reached on international tax reform and the resulting political compromise on digital services taxes.

The OECD two-pillar plan has been agreed by 136 jurisdictions including all the EU Member States and OECD members. This comes after the Irish government signed up to the OECD proposals for a global minimum effective tax rate of 15 percent for multinationals with global revenues in excess of €750 million. Ireland has negotiated an effective minimum rate set at 15 percent instead of the original “at least” 15 percent proposal by the OECD and endorsed by the G7 in July this year. Ireland has also secured agreement that the 12.5 percent rate continues to apply to companies below the €750 million revenue threshold.

The OECD confirmed at a meeting of the OECD/G20 Inclusive Framework on BEPS that 136 member countries (out of a total of 140), endorsed a revised Statement on the two-pillar solution to address the tax challenges arising from the digitalisation of the economy which was put forward last July.

Minister Donohoe welcomed the agreement noting the benefits that will accrue from this agreement, “The agreement reached this evening at the Inclusive Framework demonstrates the importance of working together to achieve positive outcomes for the world. This landmark agreement will address global tax challenges of digitalisation and provide the certainty and stability that large business and Government need.”

One of the key elements of the agreement will also see the removal of unilateral digital service taxes over the coming years, which will result in level playing field across the globe and prevent digital taxes resulting in trade tensions.

Minister Donohoe indicated that following the agreement Ireland will continue to be an attractive location for multinational enterprises to prosper.

The agreement will introduce two distinct pillars to be implemented by the members of the Inclusive Framework. Pillar One will see a reallocation of a proportion of profits to the jurisdiction of the consumer. Pillar Two will see the adoption of a new global minimum effective tax rate applying to multinationals with global revenues in excess of €750 million. The two pillars are to be further developed through technical working parties over the coming months with an implementation date of 2023 set for both pillars.

Implementation of Pillar One will happen via a multilateral convention during 2022, with effective implementation in 2023. Implementation of Pillar Two is expected to be brought into law in 2022 and effective in 2023. A detailed implementation plan is set out in here of the revised Statement .