Canada

Bold new international tax reform

TAX ALERT  | 

On June 5, 2021, the G7 agreed to global tax reform measures targeting large multinational companies (MNEs). The tax reform aims to: a) tax multinationals in the countries where they operate; and b) subject multinationals to a global minimum tax rate of at least 15% (the June 5 Agreement).

Less than a month later, 130 countries and jurisdictions, including Canada and the United States, have issued a Statement to work collaboratively to reform the international taxation rules and to ensure that MNEs pay a fair share of tax wherever they operate. In particular, these countries and jurisdictions endorsed the two-pillar approach:

  1. Pillar One will ensure a fairer distribution of profits and taxing rights among countries with respect to the largest MNEs, including digital companies. It would re-allocate some taxing rights over MNEs from their home countries to the markets where they have business activities and earn profits, regardless of whether MNEs have a physical presence there.
  2. Pillar Two seeks to introduce a global anti-base erosion rule through the introduction of a global minimum corporate tax rate of 15% that countries can use to protect their tax bases.

The participating nations have set October 2021 as the deadline for finalizing the remaining technical work on the two-pillar approach, with a plan for effective implementation in 2023. 

Middle market companies with significant digital sales or those with low global effective tax rates should carefully review the Statement as the two-pillar approach is likely to impact business decisions.

RSM CONTRIBUTORS


Subscribe to our newsletters

Subscribe


HOW CAN WE HELP YOU?

Contact us by phone +1.855.420.8473 or submit your questions, comments or proposal requests


CONTACT

Maria Severino

National Tax Leader


Recent Tax Alerts

New trust reporting on hold but beware of not filing

With filing season upon us, the CRA clarified the new trust reporting rules will not be in force for the 2021 taxation year.

  • January 19, 2022

Global minimum tax is taking shape

The OECD released its model to implement a coordinated international tax system in which MNEs will be subject to a 15% global minimum tax.

  • January 06, 2022

Are you ready for Canada's Digital Services Tax?

The federal government released the draft Digital Services Tax Act proposing a 3% tax on revenue earned from certain digital services.

  • January 03, 2022

Federal economic and fiscal update

The Canadian government provides an overview of Canada’s finances, unveils the areas of focus, and sets out proposed new tax measures.

  • December 15, 2021

Loblaw Financial: SCC considers FAPI does not apply to foreign bank

The Supreme Court of Canada provides a welcomed decision and clarifies rules for FAPI in the foreign bank context.

  • December 07, 2021