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April 25, 2022

OECD releases public consultation document on Extractives Exclusion under Amount A for Pillar One

Executive summary

On 14 April 2022, the Secretariat of the Organisation for Economic Co-operation and Development (OECD) released a public consultation document regarding the Extractives Exclusion under Amount A for Pillar One of the OECD/G20 project on Addressing the Tax Challenges Arising from the Digitalisation of the Economy (the BEPS 2.0 project).

The new taxing right established through Amount A only applies to those Multinational Enterprise (MNE) Groups that fall within the defined scope of Amount A. The Extractives Exclusion will exclude from the scope of Amount A the profits from Extractive Activities. The definition of Extractives Activities contains two elements: (i) a product test; and (ii) an activities test. Both of these tests must be met for the revenues and profits to be excluded from the Amount A scope determination. This means that the exclusion applies where the Group derives revenue from the sale of Extractive Products and the Group has carried out the relevant Exploration, Development or Extraction.

This consultation document covers Schedule [F] of the Model Rules that will govern the Extractives Exclusion. Other parts of the Model Rules on Amount A, on which the corresponding provisions for the Extractives Exclusion would be based, are pending finalization and therefore the Schedule for the Extractives Exclusion provides a preliminary description and explanation of the envisaged draft rules. The consultation document does not include the Schedule on Segmentation or the Schedule that will govern the exclusion for Regulated Financial Services. These Schedules, as well as draft rules on other aspects of Amount A, will be released for public consultation later.

The consultation document is a working document released by the OECD Secretariat to obtain input from stakeholders. It is released without prejudice as to the final agreement and does not reflect consensus of the Inclusive Framework member jurisdictions on the substance of the document. The OECD invites comments on the draft rules to be submitted in writing by 29 April 2022.

Detailed discussion


The OECD has been considering tax issues related to the digitalization of the economy since the outset of the original BEPS project in 2013. In 2019, the OECD launched the BEPS 2.0 project, which consists of Pillar One on new nexus and profit allocation rules and Pillar Two on global minimum tax rules.1 Currently, there are 141 jurisdictions participating in the BEPS 2.0 project through the Inclusive Framework.

In October 2021, a final political agreement was reached on key parameters of both pillars and an implementation plan.2 Of the 141 participating jurisdictions, 137 members of the Inclusive Framework have joined this agreement. With respect to Pillar One, one of the agreed parameters is that MNEs with global turnover above €20 billion and profitability above 10%, calculated using an averaging mechanism, would be in scope of Amount A.

In December 2021, the OECD announced plans to release a series of Secretariat working documents in the first half of 2022 on the separate building blocks of Amount A in order to obtain stakeholder input, as well as a public consultation document on Amount B in mid-2022. The first of these working documents on the nexus and revenue sourcing rules of Amount A was released for public consultation on 4 February 2022.3 The second working document on Amount A, on the tax base, was released for public consultation on 18 February 2022.4 On 4 April 2022, the third working document on the scope of Amount A was released for public consultation.5


On 14 April 2022, the OECD released the public consultation document related to the Extractives Exclusion for Amount A of Pillar One. This excludes from the scope of Amount A the profits from Extractive Activities. The term Extractive Activities means that the Group derives revenue from the sale of an Extractive Product and conducts Exploration, Development or Extraction.

According to the consultation document, an MNE Group covered by the Extractives Exclusion should follow seven steps to assess the application of Amount A. Steps 2 and 3 are specific to the Extractives Exclusion, and public comments are invited on these two steps.

  • Step 1: Apply the general scope rules (i.e., check whether the MNE Group has more than €20 billion of Revenue and a profit margin above 10%). If these thresholds are met then continue to Step 2.
  • Step 2: Re-determine whether the €20 billion of Revenue is still met after testing only the in-scope Revenue (i.e., after excluding Extractive Activities). If it is above €20 billion, continue to Step 3.
  • Step 3: Re-determine whether the 10% profitability threshold is met, by isolating the profits related to Extractive Activities, and testing the profit margin of the remaining in-scope profits. If this profit margin is below 10%, the MNE Group is out of scope. If it is above 10%, continue to Step 4.

    The consultation document indicates that simplified measures are in development for MNE Groups that exceed the revenue threshold, but whose in-scope profit margin is consistently below the 10% profitability threshold. In addition, consideration is being given to whether an initial transition period is needed to allow MNE Groups to adjust their systems.

  • Step 4: Application of the nexus and revenue sourcing rules. Revenue covered by the Extractives Exclusion is not be taken into account when applying the nexus test.
  • Step 5: Application of the profit allocation rules. The profits covered by the Extractives Exclusion are not taken into account for the application of the Marketing and Distribution Profits Safe Harbor.
  • Step 6: Profits covered by the Extractives Exclusion are excluded from the mechanism to eliminate double taxation.
  • Step 7: File the necessary documentation for administration and reporting purposes.

Step 2: Identify Extractives Activities and apply the Revenue Threshold to in-scope revenue

The basis for this test is the consolidated MNE Group revenue figure (or the revenue of a disclosed segment if the exceptional segmentation rules apply) with third-party revenue derived from Extractive Activities is subtracted. Determination of Extractive Activities includes two tests: (i) a product test (i.e., the sale of an Extractive Product"); and (ii) an activities test (i.e., conduct Exploration, Development or Extraction), both of which must be satisfied. The definition of Extractive Product includes Minerals, Mineraloids and Hydrocarbons and similar materials extracted from the earth's crust.

Exploration is defined as searching for and assessing an Extractive Product resource deposit or reservoir. Development involves the process of drilling, excavating and constructing the Exploration and Extraction facilities and the supporting infrastructure. Extraction means the removal of an Extractive Product from its natural site or from mine tailings and includes the processing undertaken to concentrate, isolate, purify, refine or liberate an Extractive Product and Transportation of such Extractive Products.

The rules recognize that not all MNE Groups involved in the extractive industry may have third-party revenue derived from Extractive Activities, as the Extractive Activities may take place intra-group. Revenues connected to such intra-group activities are not subtracted for the Step 2 scope assessment. In such situation Step 3 should be applied.

Step 3: Identifying excluded and in-scope profits

Groups that meet the general scope provisions of Step 1, and after application of Step 2 have above €20 billion of in-scope third-party revenues, will need to identify the profits derived from Extractive Activities and exclude these from Amount A. They will also need to identify the remaining profits from in-scope activities to test whether these profits are higher than the profitability threshold of 10%. Contrary to Step 2, this step may include identifying intra-group revenue and performing cost allocations to ensure that no residual profits from Extractive Activities are allocated to market jurisdictions under Amount A. In order to identify in-scope profits the MNE Group should preferably use a Disclosed Operating Segment approach. Where this approach cannot reliably be applied, the MNE Group should use the Entity-level approach.

Disclosed Operating Segment approach

In order to rely on the Disclosed Operating Segment approach, a MNE Group must meet two conditions: (i) the MNE Group must determine whether its disclosed segments predominantly generate revenue that is excluded or predominantly generate in-scope revenue, or generate mixed revenue; and (ii) the MNE Group must undertake a cost allocation exercise to ensure that costs are appropriately and reliably allocated between segments.

Under the first condition, a MNE Group should go through the "predominance test." If for a disclosed segment it is determined that it predominantly has excluded activities, the entire segment qualifies for the Extractives Exclusion. The predominance test is met if at least [75% – 85%]6 of a segment's revenues are excluded revenues and the in-scope revenues do not exceed [€1 billion].

Disclosed segments which predominantly have in-scope revenue are considered in-scope segments in their entirety. In-scope revenue is calculated as the segment revenue minus the excluded revenue reflected in the segment as defined by the Delineation Point. The Delineation Point is the deemed end point of the Excluded Activity as defined by the Model Rules (e.g., where there is a sale of the Extractive Product to a third party or deemed revenue where an Extractive Product meets the specifications of an Internationally Recognized Reference Price). The consultation document indicates that as a simplification measure, the profit margin of this segment would be used as the profit margin of the in-scope activities. After allocation of part of the "unallocated costs" of the MNE Group, it will be determined whether the profit margin is higher than 10%. If so, then the in-scope profits are determined by multiplying the in-scope revenues with the profit margin.

A third category of segments is mixed segments. A mixed segment is a segment that does not meet the two earlier categories of predominance tests, as it is neither predominantly an excluded segment, nor predominantly an in-scope segment. Such a segment is considered to be an in-scope segment. However, the profit margin of the segment cannot be determined by proxy and therefore needs to be specifically calculated. In order to identify profits and profit margin for mixed segments, a MNE Group must reliably allocate expenses to each such segment and calculate the profits of the in-scope activities of such a segment.

If the MNE Group were to have two or more disclosed operating segments that are in-scope, it would combine the in-scope portions of the segments before calculating the profit margin threshold for in-scope profits. The combined consolidated in-scope profits of these in-scope segments will form the basis of the profit before tax amount.

Entity-level approach

This test follows the same principles as the Disclosed Operating Segment approach but is applied on an Entity-level rather than a segment basis. Each Entity of an MNE Group is subject to a predominance test when applying the Delineation Point to determine the extent of excluded revenues derived by that entity. If an entity has at least [75% – 85%] of excluded revenues and the in-scope revenues of that Entity do not exceed the [€1 billion] cap, the entire Entity would qualify for the Extractives Exclusion. Conversely, any Entity that does not meet the predominance test will be considered an in-scope entity. The in-scope revenue is calculated as the total revenue of the Entity minus the excluded revenue as defined by the Delineation Point.

In this case, the MNE Group would combine the in-scope entities into one consolidated bespoke segment for Amount A, following the segment accounting or management accounting principles that would have applied had it decided to publish the remaining in-scope portion of those entities as one combined disclosed operating segment.

Reapplication of the profitability threshold

If after following the above steps, the in-scope profit margin is above 10%, the averaging mechanism would apply to the disclosed operating segments or bespoke segments.

If after the application of the averaging mechanism and losses to the in-scope segment/disclosed operating segment the profit margin is above 10%, those remaining profits are in scope of Amount A.

Further, an MNE Group would also calculate and carry forward losses relating to its disclosed operating segments or bespoke segments. The consultation document recognizes the difficulty of applying these rules in the context of bespoke segments and indicated that further consideration is being given on how to apply this rule.


If adopted, the application of the draft model rules would have significant implications for companies that are in scope of Pillar One Amount A, affecting the amount of profits to be re-allocated to market jurisdictions and leading to new compliance requirements, including requiring a new calculation of a tax base separate from the entity-based domestic tax base calculations.

Companies that could be in scope of Pillar One Amount A and that conduct extractive activities should monitor these developments closely and start evaluating the impact of the proposed rules. They should also consider the opportunity to submit comments on the consultation document.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Belastingadviseurs LLP, Rotterdam

Ernst & Young Belastingadviseurs LLP, Amsterdam

Ernst & Young Limited (New Zealand), Auckland

Ernst & Young LLP (United States), New York

Ernst & Young LLP (United States), Washington, DC



1 For additional information see EY Global Tax Alert, OECD's new insights describe growing support on comprehensive changes to international tax policy, beyond digital, dated 29 January 2019; EY Global Tax Alert, OECD opens public consultation on addressing tax challenges arising from digitalization of the economy: time-sensitive issue impacting all multinational enterprises, dated 14 February 2019; EY Global Tax Alert, OECD hosts public consultation on document proposing significant changes to the international tax system, dated 18 March 2019; EY Global Tax Alert, OECD workplan envisions global agreement on new rules for taxing multinational enterprises, dated 3 June 2019; EY Global Tax Alert, OECD releases BEPS 2.0 Pillar One Blueprint and invites public comments, dated 19 October 2020; and EY Global Tax Alert, OECD releases BEPS 2.0 Pillar Two Blueprint and invites public comments, dated 19 October 2020.

2 See EY Global Tax Alert, OECD releases statement updating July conceptual agreement on BEPS 2.0 project, dated 11 October 2021; and EY Global Tax Alert, OECD announces conceptual agreement in BEPS 2.0 project, dated 1 July 2021.

3 See EY Global Tax Alert, OECD releases Pillar One public consultation document on draft nexus and revenue sourcing rules, dated 11 February 2022.

4 See EY Global Tax Alert, OECD releases Pillar One public consultation document on draft rules for tax base determinations, dated 21 February 2022.

5 See EY Global Tax Alert, OECD releases public consultation document on draft rules regarding scope under Amount A for Pillar One, dated 12 April 2022.

6 Percentages and amounts are included in brackets in the consultation document, likely indicating that this is still under discussion.