March 28, 2023
UK publishes legislation for multinational top-up tax and domestic top-up tax
The UK's Finance (No.2) Bill 2023, published on 23 March 2023, includes the legislation to implement the Organisation for Economic Co-operation and Development (OECD) Global Anti-Base Erosion (GloBE) Pillar Two rules in the United Kingdom (UK).
The legislation covers the multinational top-up tax (MTUT), which includes the GloBE calculation and income inclusion rule (IIR), as well as a domestic top-up tax (DTUT), which incorporates the MTUT computation rules and is intended to be a qualifying domestic minimum top-up tax. Both the MTUT and DTUT will apply to large multinational enterprises for accounting periods beginning on or after 31 December 2023.
The legislation builds on the draft legislation that the UK published on 20 July 2022, in addition to providing some major key developments that are intended to reflect the OECD Administrative Guidance published on 2 February 2023. While we continue to work through the detail, we have summarized some of the key developments below.
Key technical developments
An election has been included to apply a transitional safe harbor for accounting periods commencing on or before 31 December 2026 and ending on or before 30 June 2028. This is intended to reflect the Transitional Country-by-Country Reporting Safe Harbour rules set out in OECD guidance published on 20 December 2022.
Filing and reporting
A single member of the group will report the MTUT to His Majesty's Revenue and Customs. The ultimate parent of the group will be the default member, but groups will be able to nominate an alternative member to fulfil these responsibilities. The DTUT is chargeable on qualifying entities located in the UK.
A GloBE Information Return will be filed by the group and both MTUT and DTUT is payable and reportable on an annual basis.
The publication of the UK legislation represents a significant step toward implementation of the GloBE Pillar Two rules in the UK. This implementation is also progressing in other jurisdictions, so groups can now start to assess in more detail both the likely impact of the GloBE Pillar Two rules on their overall tax charge and the work needed to comply with their likely GloBE Pillar Two obligations.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United Kingdom)
Ernst & Young LLP (United States), UK Tax Desk, New York
Ernst & Young LLP (United States), Transaction Tax Desk, New York
Ernst & Young LLP (United States), UK Tax Desk, Chicago
Ernst & Young Tax Co. (Japan), UK Tax Desk (Asia-Pacific), Tokyo