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

Zenith Retail Ltd, an Indian company, wants to know how its Indian tax position would change if a global minimum tax regime (Pillar Two of the OECD/G20 framework) applies to its group. The group's parent is in a foreign country, and the Indian subsidiary earns profits taxed at an effective rate of 9% in India. Under the Pillar Two GloBE rules, what is the agreed global minimum effective tax rate against which the jurisdictional effective tax rate is compared?

The Pillar Two GloBE rules set a global minimum effective tax rate of 15% for in-scope multinational groups. Where a jurisdiction's effective rate, such as 9% here, falls below 15%, a top-up tax is charged to bring the tax up to the minimum level.

  1. A10%
  2. B15%Correct
  3. C20%
  4. D25%

Explanation

Pillar Two (GloBE rules) prescribes a global minimum effective tax rate of 15% for large multinational groups. Where the jurisdictional effective rate (here 9%) is below 15%, a top-up tax arises. The 10%, 20% and 25% figures are not the agreed minimum rate.

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