The UK included and enacted in the Finance (No. 2) Act 2023 the global minimum tax (or Pillar Two) recently. In addition, the Finance Bill next year has already been proposed to be amended to keep the UK legislation aligned with developments at the OECD level.
Background
After the international agreement on Pillar Two by the Organisation for Economic Co-operation and Development (OECD), the European Union unanimously adopted a directive implementing the global minimum tax in December 2022. The following month, the OECD published revenue estimates to assess the actual effect of the tax on public finances.
Taxpayers’ Reaction
Most UK multinationals expect their tax planning and business transactions to change moderately and significantly once the global minimum tax is implemented.
Conversely, UK taxpayers are more prepared than their global counterparts, having completed a Pillar Two effect assessment.
These reforms will be a significant change to the global tax landscape and require considerable technical analysis and compliance work by multinationals to assess their effect on business. The government expects these reforms to collect an additional £2.3 thousand million per year between 2027 and 2028.
The reporting period for the overall minimum tax rate of 15% will come into effect in the UK from December 31, 2023.
Complementary Tax
The UK government has also confirmed that the regime will include a qualifying national minimum complementary tax.
Source: Transfer Pricing News
