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CA Final · Direct Tax Laws & International Taxation · Latest Developments in International Taxation

Case: Zephyr Ltd, an Indian company, is considering a cross-border structure. A Group of countries has agreed to the OECD/G20 Inclusive Framework 'Two-Pillar Solution' for taxing the digitalising economy. Which of the following correctly describes the core objective of Pillar Two (GloBE rules)?

Pillar Two, the GloBE rules, aims to ensure that multinational groups with consolidated revenue of at least EUR 750 million pay an effective tax of at least 15% in each jurisdiction where they operate, through top-up taxes. Reallocation of profits to market jurisdictions is Pillar One.

  1. AAllocating a share of residual profits of very large multinationals to market jurisdictions
  2. BEnsuring multinational groups with consolidated revenue of at least EUR 750 million pay a minimum effective tax of 15% in each jurisdictionCorrect
  3. CAbolishing withholding tax on royalties between treaty partners
  4. DImposing a uniform 15% tax on all domestic companies of a country

Explanation

Pillar Two introduces a global minimum tax: large MNE groups (consolidated revenue of at least EUR 750 million) must bear an effective rate of at least 15% in every jurisdiction, with top-up tax charged if lower. Option A describes Pillar One (Amount A), which is the key distractor.

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