OECD Releases Guidance on Global Minimum Tax, GILTI

Recently, the Organization for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting released technical guidance on the implementation of its 15% global minimum tax on multinational enterprises, including clarification on the application of a U.S. tax on intangible income. The guidance notably sheds light on how the global intangible low-tax income (GILTI) regime enacted under the Tax Cuts and Jobs Act of 2017 fits within the global minimum tax’s design. According to the document, GILTI is now considered a Controlled Foreign Corporation Tax Regime under, such as the income inclusion rule – the primary mechanism of the global minimum tax. A Blended CFC Tax Regime aggregates income, losses, and creditable taxes of all the CFCs for the purposes of calculating the shareholder’s tax liability under the regime if the applicable rate is less than 15%. The GILTI applicable rate is 13.125%, and the OECD will assess whether to allow a special allocation methodology for Blended CFC Tax Regimes after the unspecified limited time period.

The U.S. Treasury publicly expressed support for the guidance in a press release, “The continued progress in implementing the global minimum tax represents another step in leveling the playing field for U.S. businesses, while also protecting U.S. workers and middle-class families by ending the race to the bottom in corporate tax rates,” said Assistant Secretary of the Treasury for Tax Policy Lily Batchelder. “We welcome this agreed guidance on key technical questions, which will deliver certainty for green energy tax incentives, support coordinated outcomes, and provide additional clarity that stakeholders have asked for.”

McGuire Sponsel’s Global Business Services team is available to discuss any aspects of this OECD initiative.  Please reach out with questions and stay tuned to further information.