The Belated Pillar 2 Subject-to-Tax Rule, Part 2

Reprinted from Tax Notes International, Volume 112, No. 4, Pp. 503-510

8 Pages Posted: 13 Dec 2024 Last revised: 12 Nov 2024

Date Written: October 23, 2023

Abstract

Exceptions to a tax rule can be very intriguing. They are sometimes required to ensure it does not produce unintended outcomes. However, if they are too numerous, they can be used by savvy taxpayers (and their lawyers) to arrive at those outcomes one way or another. Numerous exceptions can also threaten the legal certainty that tax rules should ideally provide. As it was presented by the OECD on July 17, 2023, the subject-to-tax rule (STTR) of pillar 2 is filled to the brim with caveats, special provisions, and exceptions. In fact, one-third of the paragraphs that make up the STTR are focused either on deviations from the general rule or on clarifying what is outside of its scope. I have expressed my concern in the first part of this series about the complexity of the STTR and whether it is truly designed to preserve the taxing rights of developing countries. In this article, as I go through the many exceptions to the rule, I hope you will conclude, as I did, that this version of the STTR is not a welcome addition to tax treaties across the globe.

Keywords: Pillar Two, GloBE, International Tax, BEPS, OECD, STTR, International Law, Tax Policy

Suggested Citation

Carvalho, Lucas de Lima, The Belated Pillar 2 Subject-to-Tax Rule, Part 2 (October 23, 2023). Reprinted from Tax Notes International, Volume 112, No. 4, Pp. 503-510, Available at SSRN: https://ssrn.com/abstract=5003434 or http://dx.doi.org/10.2139/ssrn.5003434

Lucas de Lima Carvalho (Contact Author)

Latin American Tax Policy Forum (LATPF) ( email )

Rua Balthazar da Veiga, 589
São Paulo, São Paulo 04510001
Brazil

HOME PAGE: http://www.latpf.org

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