The Treatment of Tax Incentives under Pillar Two

Abstract

This paper analyses the potential impact of the minimum tax envisaged under the OECD Pillar Two on several common corporate tax incentives. It reaches the conclusion that while the impact is expected to be low to moderate for some common incentives, such as participation exemption regimes and accelerated depreciations, it might be significant for direct cuts from the tax bill, which include tax holidays, intellectual property (IP) box regimes and special economic zones (SEZs). Hence, the response by policymakers must be informed by the specific interaction between the corporate tax incentives under their respective systems and the upcoming international standards on the minimum level of taxation.

Keywords: BEPS, corporate tax law, FDI, international taxation, tax incentives, Pillar Two

JEL Classification: F21, H25, K34