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February 15, 2023

How a global minimum tax will affect sustainability tax incentives

With BEPS 2.0 Pillar Two implementation at various stages around the world, it is important for multinational companies and tax jurisdictions to fully appreciate the impact a global minimum 15% effective tax rate (ETR) will have on existing tax incentives. Pillar Two has been specifically designed by the OECD/G20 Inclusive Framework to eliminate rate-based tax competition between jurisdictions, regardless of the objective and intent behind the tax incentives. Under the Inclusive Framework’s Global Anti-Base Erosion Rules (GLoBE) rules, the financial benefit of many tax incentives could be significantly diluted by a top-up tax should a tax incentive take a multinational’s ETR below 15% in that particular jurisdiction.

This EY article discusses how jurisdictions and multinationals must take steps now to ensure they are ready for the Inclusive Framework’s GLoBE rules.