BEPS 2.0 developments: Pillar One and Pillar Two

Tax challenges arising from the digitalisation of the economy

The Organisation for Economic Cooperation and Development (OECD) is working full steam on the two-pillar solution of the Base Erosion and Profit Shifting (BEPS) 2.0 project. Multinational enterprises across industries are likely to be affected. Check out the latest developments and PwC insights to get prepared for the new tax era.

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“BEPS 2.0 has brought groundbreaking changes to the international tax landscape. Multinational enterprises should take immediate actions to assess the potential impact on their business models and global tax liabilities, as well as to get themselves prepared for the additional tax compliance and reporting requirements.”

Charles Lee, South China (incl. Hong Kong SAR) Tax Leader, PwC China

Pillar One Model Rules


OECD releases a Progress Report on Amount A of Pillar One

The OECD released a Progress Report on Amount A of Pillar One on 11 July 2022 (with comments due by 19 August 2022). The OECD also published FAQs and a fact sheet that includes a high-level overview of the rules on Amount A and a process map with steps for applying the rules.

15 July 2022

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Draft Model Rules on scope of Amount A and exclusions for Extractives and Regulated Financial Services – An overview

The OECD recently released the following Amount A draft Model Rules for public consultation:

  1. Domestic legislation on scope;
  2. Extractives Exclusion; and
  3. Regulated Financial Services Exclusion.

These rules determine when a Group will be in scope of Amount A, subject to exclusions for Extractive Activities and Regulated Financial Institutions. This news flash provides a short overview of these rules.


8 June 2022

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Draft Model Rules on tax certainty aspects of Amount A

On 27 May 2022, the OECD released two sets of draft Model Rules on the tax certainty aspects of Amount A for public consultation (with comments due by 10 June 2022). These are the sixth and seventh in a series of public consultations on the Pillar One Amount A Model Rules that the OECD is expected to release over the coming months.


1 June 2022

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Draft Model Rules on regulated financial services exclusion under Amount A

On 6 May 2022, the OECD released the draft Model Rules on the regulated financial services exclusion under Amount A for public consultation (with comments due by 20 May 2022). This is the fifth in a series of public consultations on the Pillar One Amount A Model Rules that the OECD is expected to release over the coming months.


13 May 2022

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Draft Model Rules on extractives exclusion under Amount A

On 14 April 2022, the OECD released the draft Model Rules on the extractives exclusion under Amount A for public consultation (with comments due by 29 April 2022). The consultation document specifically identifies several open issues that the Task Force on the Digital Economy (TFDE) is currently exploring and invites input from stakeholders. Detailed commentary on a number of technical items is also expected at a later date.


22 April 2022

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Draft Model Rules on domestic legislation on scope of Amount A

On 4 April 2022, the OECD released the draft Model Rules on the domestic legislation on the scope of Amount A for public consultation (with comments due on 20 April 2022). This is the third in a series of public consultations on the Pillar One Amount A Model Rules that the OECD is expected to release over the coming months. The consultation document notes that the rules covering the scope exclusions for extractives and regulated financial services and the application of Amount A to a disclosed segment will be released at a later date.


6 April 2022

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Draft Model Rules on tax base determinations of Amount A

On 18 February 2022, the OECD released the draft Model Rules on the tax base determinations of Amount A for public consultation (with comments due on 4 March 2022). This is the second in a series of up to 13 so-called ‘building blocks’ for Amount A that the OECD is expected to release for public consultation over the coming months.


4 March 2022

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Draft Model Rules on revenue sourcing and nexus of Amount A

On 4 February 2022, the OECD released the draft Model Rules on the nexus and revenue sourcing of Amount A for public consultation (with comments due on 18 February 2022). This is the first in a series of rules that the OECD is expected to release for public consultation over the coming months.


15 February 2022

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Pillar Two Model Rules



Hong Kong defers Pillar Two implementation to 2024

Having regard to the views collected and the latest progress of other jurisdictions in implementing Pillar Two, on 15 Aug 2022 the HKSAR Government announced the deferral of the implementation of the IIR to 2024 at the earliest, with the legislative proposal to be introduced in 2023. The timeline for the UTPR and the DMT will be announced later, with reference to the implementation plans of other jurisdictions. A consultation exercise is anticipated towards the end of 2022.

17 August 2022

Impact of BEPS 2.0 Pillar Two on international shipping business 

The OECD released the Global Anti-Base Erosion (GloBE) Model Rules on 20 December 2021 and the Commentary to the GloBE Rules on 14 March 2022. Among others, the GloBE Rules provide an exclusion of International Shipping Income and Qualified Ancillary International Shipping Income. In order to qualify for the exclusion, a Constituent Entity must demonstrate that the strategic or commercial management of all ships concerned is effectively carried on from within the jurisdiction where the Constituent Entity is located.


8 April 2022

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Pillar Two Commentary and public consultation on the Implementation Framework

Further to the Global Anti-Base Erosion (GloBE) Model Rules released on 20 December 2021, the OECD released the Commentary and the illustrative examples to the GloBE Rules on 14 March 2022. The Commentary provides technical guidance and elaborates on the application and operation of the GloBE Rules, which is intended to promote a consistent interpretation to facilitate coordinated outcomes for both tax administrations and multinational enterprise groups (MNE Groups). In the meantime, the OECD is also seeking public input on the GloBE Implementation Framework, with comments due on 11 April 2022.


4 April 2022

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Global Anti-Base Erosion (GloBE) Model Rules

Further to its 8 October 2021 Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, the OECD released the long-awaited GloBE Model Rules on 20 December 2021 to assist in the implementation of a landmark reform to the international tax system, which will ensure that multinational enterprises will be subject to a minimum tax rate of 15% from 2023.


7 January 2022

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Other news and updates


136 jurisdictions agree on a new international corporate tax framework under BEPS 2.0

On 8 October 2021, 136 out of the 140 jurisdictions of the OECD/G20 Inclusive Framework on BEPS have joined the updated Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, which updates and finalises a July agreement by the Inclusive Framework members to fundamentally reform international tax rules. Mainland China and Hong Kong SAR remain amongst the 136 jurisdictions.


12 October 2021

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Over 130 jurisdictions agree on a new international corporate tax framework under BEPS 2.0

130 out of the 139 member jurisdictions of the G20/OECD Inclusive Framework on BEPS jointly issued the Statement on a Two-Pillar Solution to Address the Tax Challenges Arising From the Digitalisation of the Economy on 1 July 2021. As of 5 July 2021, 131 members of the Inclusive Framework have joined the Statement. The Statement summarises, on a high-level basis, the key components of Pillar One and Pillar Two agreed by the Inclusive Framework as of 1 July 2021. In particular, the Statement confirms that the Global anti-Base Erosion (GloBE) rules under Pillar Two will not be set as a minimum standard but will have the status of a common approach.


6 July 2021

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The G7 agreed on certain key aspects of Pillars One and Two, including a global minimum tax of ‘at least’ 15% 

The G7 announced on 5 June 2021 that its member countries agreed, among other things, on a global minimum tax of ‘at least’ 15% under Pillar Two and a taxing right for market jurisdictions on at least 20% of the profits exceeding a 10% margin of large multinational groups under Pillar One of the BEPS 2.0 project.


11 June 2021

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The OECD’s blueprints on Pillar One and Pillar Two

The OECD published the blueprints on Pillar One and Pillar Two on 12 October 2020. The blueprints set out the detailed technical design of various components of the two pillars, but agreement has yet to be reached among the Inclusive Framework members. A public consultation is held from 12 October to 14 December 2020.


13 October 2020

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The OECD seeks input on design of the Pillar Two GloBE rules

On 8 November 2019, the OECD published a public consultation document on the GloBE rules under Pillar Two. The consultation focuses on the IIR and seeks stakeholders’ views on three technical design aspects of the GloBE proposal: (1) tax base determination, (2) blending of high-taxed and low-taxed income and (3) carve-outs, thresholds and exclusions.


15 November 2019

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BEPS 2.0 - Will the overhaul of international tax rules reshape the Hong Kong tax regime?

As follow-up work on Action 1 of the BEPS Action Plan on addressing the tax challenges of the digital economy, the OECD has published a number of documents setting out the OECD’s approach and proposal to deal with these challenges since the issuance of the final report on BEPS Action 1 in October 2015. The proposal put forward by the OECD involves two pillars. While the proposed rules under Pillar One will mainly affect highly digitalised and consumer-facing businesses, the proposed rules under Pillar Two will affect all businesses with cross-border activities in general. This News Flash focuses on the proposed rules under Pillar Two and the key implications of these new rules to the Hong Kong tax regime and businesses in Hong Kong.  


11 October 2019

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Charles Lee

South China (incl. Hong Kong SAR) Tax Leader, PwC China

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