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  • Latest News
    23 Jul 2021
    • New proposals have been mis-reported, mis-interpreted and misunderstood
    • Jurisdictions will not have to increase tax rates to the global minimum rate, instead countries have a right to impose a top-up tax in relation to multinational enterprises operating in other countries with lower taxes 
    • Countries that have signed the agreement have the right to impose a top-up tax without legal action, yet this is not a requirement for countries to impose a top-up tax
    • New rules are not all encompassing. Companies under €750 million turnover are exempt
    • Proposals are far from final with more details set to emerge

    20 JULY, TORTOLA, BRITISH VIRGIN ISLANDS: On Friday 16 July, BVI Finance convened a panel of experts to discuss the implications of a proposed tax reforms including a Global Minimum Corporate Tax rate, as recently agreed upon by the Organisation for Economic Co-operation and Development (OECD), G7 and G20 countries, and what this could mean for International Finance Centres (IFCs) including the British Virgin Islands (BVI). A common theme of the discussion was the mis-interpretation and reporting of the new proposals, specifically the imposing of a global minimum corporate tax rate currently proposed at 15%.

    The expert panel consisted of Lisa Penn-Lettsome, Executive Director, International Business BVI Government; Geoff Cook, Geoff Cook Advisory Ltd, Chair of Mourant Consulting Ltd and Chair of the STEP Global Public Policy Committee; and Mark Pragnell, Director Pragmatix Advisory Limited. The event was moderated by Oliver Cooper, Tax Consultant at Charles Russell Speechlys LLP and Counsel to the IFC Forum.

    As set out by the OECD, the goal of the new reforms is to ensure that multinational enterprises pay a fair share of tax wherever they operate and is based on a two-pillar package. Pillar One aims to ensure a fairer distribution of profits and taxing rights among countries with respect to the largest MNEs. Pillar Two seeks to put a floor on tax competition on corporate income tax through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases. Pillar Two does not eliminate tax competition, but it does set multilaterally agreed limitations on it. As of 9 July, 132 jurisdictions - including the BVI - have signed up to the new plan.  

    The closed discussion was attended by delegates from around the world, including BVI Finance members, private sector practitioners and representatives from some of the world’s leading financial services firms. Key takeaways from the include:

    • Countries do not have to impose a global minimum corporate tax rate

    Jurisdictions do not have to increase their tax rates to the global minimum, there is only a right for home countries to impose a top-up tax in relation to multinational enterprises (MNE) operating in other countries with lower taxes. However, it does not mean that a country can impose a top up tax for each jurisdiction that an MNE is active in.

     

    • Countries are not required to impose a top-up tax, but have the right to impose it without facing legal action

    The agreement states that countries have a right to impose a top-up tax without being sued in the International Court of Justice, or the WTO arbitration process. 

    • The proposals are not all encompassing

    Companies with less than a threshold of EUR 750 million in turnover will not be affected and countries do not have a right to impose a top up against these businesses.

    • Proposals are far from final with more details set to emerge

    The tax proposals contain a number of points on which OECD Inclusive Framework members must still agree details – for example the global minimum tax rate will be “at least” 15%, with precise numbers to be decided. In addition, a small number of Inclusive Framework members have not signed on to these proposals. The deal will be finalised in October 2021.

    Commenting on the discussion, Elise Donovan, CEO of BVI Finance said: “We were delighted to bring together such a distinguished panel  to provide clarity on these tax reform proposals and present an expert view on the real consequences and implications for IFCs.

    “Geoff, Mark and Lisa are widely respected as leading practitioners in their fields, with a wealth of experience and knowledge on IFCs, regulation, tax and the key role that IFCs play in the global economy. Oliver proved to be the perfect moderator for the event, with his own deep knowledge of the international tax landscape, fine-tuned through his work as policy lead with the IFC Forum.

    “It is clear that there is much more detail yet to come on how these proposals will be implemented. The BVI will monitor developments closely and will continue to provide clear insights to our clients, members and stakeholders.”

    Ends

     

8:00PM - 25 May 21

Join us on Friday to learn more about how the BVI will reopen; COVID-19 update. Link: https://t.co/gj6WUhc76R https://t.co/jIF9pMLxLB

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