At the end of May, the Organisation for Economic Co-operation and Development (OECD) released two public consultation documents related to the tax certainty aspects of Amount A. In that regard, multinational enterprises should note that Draft Amount A and Draft Related Issues provide a brief two-week public comment period ending June 10, 2022.
1. Draft Amount A
Pillar 1, “Fiscal certainty tax framework for Amount A,” proposes new mechanisms for multinational companies to obtain certainty on aspects of Amount A. Draft Amount A calls for a new tax certainty framework from three different mechanisms:
- A scope certainty review would provide multinationals with certainty that they are not within the scope of Amount A for an agreed period.
- An advance certainty review that would provide certainty on certain aspects of a multinational group’s methodology for applying the Amount A rules for subsequent periods, including the methodology for sourcing revenue, the categorization of revenue, the choice of a reliable method, its internal control framework and the methodology for applying segmentation.
- A comprehensive certainty review would provide binding certainty on all aspects of the new Amount A rules for a finalized period, whereby it will ensure the eradication of double taxation.
Each mechanism is a voluntary choice of the multinational group. Each review mechanism would be supported by “Determination Panels” to resolve any disputes arising between the Tax Administrations concerning the processes. This draft has over 80 pages of descriptions detailing how the mechanisms and determination panels could work in practice.
2. Draft of Related Issues
Pillar 1, “Tax Certainty for Amount A Issues,” proposes a mandatory and binding dispute resolution mechanism for Amount A issues, including transfer pricing and attribution of profits to permanent establishments.
These disputes on related issues are those that the tax authorities are unable to resolve within two years after the multinationals submit the dispute to the competent authorities as a Mutual Agreement Procedure case under existing procedures.
3. Effect on multinational companies
Because the public comment period is very short, closing on June 10, 2022, time is of the essence for in-scope and potentially in-scope multinational companies to review and consider submitting comments.
Source: Mondaq 16/06/22