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

Zephyr Components Ltd, an Indian company, has a subsidiary in a country that has implemented the OECD Pillar Two Global Anti-Base Erosion (GloBE) rules. The subsidiary's jurisdictional effective tax rate is computed at 11%. Under the GloBE framework, what is the agreed global minimum effective tax rate against which the top-up tax is measured?

The GloBE rules under Pillar Two use a global minimum effective tax rate of 15%. If a jurisdiction's effective tax rate falls below this level, such as 11%, a top-up tax is charged on the shortfall for in-scope multinational groups.

  1. A10%
  2. B12%
  3. C15%Correct
  4. D25%

Explanation

Pillar Two sets a global minimum effective tax rate of 15% for large multinational groups. Where the jurisdictional ETR is 11%, the shortfall of 4 percentage points on excess profit is the basis for top-up tax. The rates of 10%, 12% and 25% do not correspond to the agreed minimum.

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