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

Zephyr Tech Inc., a company incorporated in Country X, has no permanent establishment in India. Its Indian customers access its software platform online. The question is which concept from the OECD's BEPS 2.0 project is designed to allocate a share of the residual profits of very large, highly profitable multinational groups to market jurisdictions even where the group has no physical presence there. Identify it.

Pillar One, Amount A, is the correct answer. It reallocates a share of residual profits of very large and highly profitable multinational groups to market jurisdictions even without physical presence. Pillar Two instead ensures a minimum tax rate, and Amount B only simplifies transfer pricing for baseline distribution activities.

  1. APillar One, Amount ACorrect
  2. BPillar Two, GloBE Income Inclusion Rule
  3. CPillar Two, Subject to Tax Rule
  4. DPillar One, Amount B

Explanation

Amount A under Pillar One reallocates a portion of the residual profit of the largest and most profitable multinational groups to market jurisdictions, irrespective of physical presence. The GloBE rules under Pillar Two ensure a minimum effective tax rate and do not allocate taxing rights to market jurisdictions. Amount B simplifies the pricing of baseline marketing and distribution activities.

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