G20: OECD published draft document on model rules for nexus and revenue sourcing under Pillar One for public consultation
Description
OECD published draft document on model rules for nexus and revenue sourcing under Pillar One for public consultation
On 4 February 2022, the Secretariat of the Organisation for Economic Cooperation and Development (OECD) published a draft document on model rules for nexus and revenue under Pillar One for public consultation. The stakeholders are invited to submit their feedback and comments until 18 February 2022. The two-pillar solution aims to implement effective taxation of the digital economy. Pillar One addresses the tax rules and targets multinational enterprises (MNEs) with the threshold set at a global turnover of more than EUR 20 billion and a before tax profitability of 10%. To a certain extent, profit taxation rights are to be moved away from the MNEs physical location into the destination countries of its goods or services. The revenue sourcing rules outlined in the draft document are intended to be used to determine if a specific jurisdiction qualifies for profit reallocation under Amount A of Pillar One. Under the proposed rules, nexus in a specific market jurisdiction would be determined based on a specific type of revenue, e.g. services, intangible property, finished goods, government grants etc. The revenue sourcing rules provide a clear methodology and a set of indicators to be used in the market jurisdiction determination and for jurisdiction approximation for cases in which the necessary information is not available.
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