Organisation for Economic Co-operation and Development (OECD) published the sixth annual progress report of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) on October 4, 2022 (the Progress Report). The Progress Report covers work on addressing the tax challenges of the digitalization of the economy (BEPS 2.0) of Inclusive Framework during the period from September 2021 to September 2022.

 The Progress Report has focused on implementation, based on broad agreement on Pillar One & Pillar Two. The Inclusive Framework agreed to a new timeline for delivery on Amount A for Pillar One, with the objective of completing the work on MLC 2.0 and related Explanatory Statement with respect to Amount A so that a signing ceremony can be held in the first half of 2023 for it to come into force in 2024. With respect to Amount B, which is intended to provide for fixed returns for baseline marketing and distribution activities, the Report indicates that a public consultation document is expected to be released by end 2022. 

The Inclusive Framework agreed to a new timeline for delivery on Amount A for Pillar One, with the objective of completing the work on MLC 2.0 and related Explanatory Statement with respect to Amount A so that a signing ceremony can be held in the first half of 2023 for it to come into force in 2024. With respect to Amount B, which is intended to provide for fixed returns for baseline marketing and distribution activities, the Report indicates that a public consultation document is expected to be released by end 2022.

On Pillar Two, the Progress Report indicates that the GloBE Implementation Framework, which will include administrative guidance, a common filing process and safe harbors to reduce compliance costs, will be released in the second half of 2022. Also, the Report states that the Subject to Tax Rule (STTR) draft model tax treaty provision and related commentary is expected to be released for public comment later in the year.

The Report states that effective implementation of Pillars One and Two will be important to support domestic resource mobilization in developing countries. It is critical to make Pillar One and Pillar Two a reality, failing which, there may be a resurgence of uncoordinated measures by economies, creating disputes and controversy.

For Corporates and businesses impacted by Pillar One & Pillar Two, it is important to engage with the Inclusive Framework, including participating in the public consultations by providing written comments and practical implications of the new rules that are being developed. In parallel, it will be relevant to conduct impact analysis of new rules.