On 11 December, San Marino deposited its instrument of ratification for the Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule (the STTR Convention), becoming the first jurisdiction to do so.
The Pillar Two Subject to Tax Rule (STTR) is a treaty-based rule applying to a defined set of cross-border intragroup payments. Where these payments are subject to a corporate income tax rate below 9% in the recipient’s jurisdiction of residence, it allows the jurisdiction of source to apply additional tax up to that minimum rate.
Members of the Inclusive Framework on BEPS that apply nominal corporate income tax rates below 9% to income covered by the STTR have committed to incorporate the STTR into bilateral tax agreements with Members of the Inclusive Framework that are developing countries when requested to do so. The Inclusive Framework adopted the STTR Convention to enable the implementation of the STTR in existing bilateral tax treaties without the need for bilateral amendments.
The STTR Convention will enter into force following the deposit of a second instrument of ratification, acceptance or approval.
In addition, on 27 November, Georgia made notifications to extend its list of agreements to be covered by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS Convention), which now covers around 2 000 bilateral tax treaties.
As of today, 90 jurisdictions have either ratified, accepted, or approved the BEPS Convention resulting in the modification of over 1 600 treaties. Around 400 additional treaties will be modified once the BEPS Convention is ratified by all Signatories.
The BEPS Convention, negotiated by more than 100 countries and jurisdictions under a mandate from the G20 Finance Ministers and Central Bank Governors, is one of the most prominent results of the OECD/G20 BEPS Project and is the world’s leading instrument for updating bilateral tax treaties and reducing opportunities for tax avoidance by multinational enterprises.
The text of the STTR Convention, the explanatory statement, background information, and positions of each signatory and party are available at https://oe.cd/sttr-mli.
The text of the BEPS Convention, the explanatory statement, background information, database, and positions of each signatory and party are available at https://oe.cd/mli.
