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

Nova Inc., a non-resident digital platform, has Indian users. Which statement best captures the Pillar One Amount A reallocation under the OECD framework?

Amount A reallocates a share of the residual profit of very large, highly profitable multinationals to market jurisdictions even where the group has no physical presence. It is a new taxing right, unlike a flat levy on receipts or the traditional permanent establishment approach.

  1. AA share of residual profit of very large, highly profitable multinationals is reallocated to market jurisdictions regardless of physical presenceCorrect
  2. BA fixed 2% levy is imposed on gross receipts of all non-resident digital companies
  3. CProfits are reallocated only to jurisdictions where the group has a permanent establishment
  4. DAll profits of the group are taxed in the country of the ultimate parent entity

Explanation

Amount A reallocates a portion of residual profit of the largest and most profitable multinationals to market jurisdictions, irrespective of physical presence. The 2% levy resembles the former equalisation levy, not Amount A. PE-based allocation and parent-only taxation are existing or unrelated approaches.

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