Current developments on Pillar One

data). The timing of the signing of the multilateral convention has also been clarified. 

Pillar One sets rules on how to redistribute a part of profits of the largest and most profitable multinational groups to the countries where their goods are sold or services consumed (Amount A), regardless of their presence in that market country. Pillar One also sets out rules on how to allocate percentage profit margins (Amount B) to marketing and distribution activities in the country of the sale of goods or consumption of services. The rules for determining Amount B should be applicable regardless of the size of the corporate group. They can be found in the OECD's report of February 2024, which we covered here. Also included are the rules for a simplified and streamlined approach to determine Amount B, which have now been incorporated into the OECD Transfer Pricing Guidelines (Part B, Annex to Chapter IV).

The OECD has released supplementary guidance on the report, with a list of jurisdictions that based on current economic indicators (country rating BBB+ and below) can use this approach, as well as a list of countries that have expressed a preliminary decision to use this option (of large economies, e.g. Brazil, Argentina; of European countries, e.g. Ukraine, Serbia), with the possibility of introducing these rules as early as 2025. The other countries of the Inclusive Framework should respect this approach, so that there should be no further taxation of profits taxed using Amount B in these countries. 

At the end of May, the OECD further announced that they are close to finalising all Pillar One documents, with the aim of opening the multilateral convention for signing at the end of June 2024. Several countries are making their commitment to not introduce a digital tax conditional upon implementing Pillar One rules (especially Amount A).