Budget 2024 | India drafts laws establishing a worldwide minimum tax for transnational corporations: Report

The global minimum tax, often referred to as the Pillar Two regime, guarantees a minimum effective tax rate of 15 percent in every nation in which multinational enterprises (MNEs) do business in an effort to deter them from moving earnings to low-tax jurisdictions.

Since 2007, India has become an important OECD partner.

Multinational enterprises (MNEs) are the target of laws that India is allegedly developing for the global minimum tax. According to those with knowledge of the situation who spoke with Business Standard, this legislation is anticipated to be included in the next Union Budget, which is set to be presented on July 23.

Ensuring a minimum effective tax rate of 15 percent in all countries where multinational enterprises operate is the goal of the global minimum tax, sometimes referred to as the Pillar Two regime. This is meant to deter MNEs from moving revenues to low-tax jurisdictions.

India may need to alter a number of tax regulations, including the Income Inclusion Rule, the Qualified Domestic Minimum Top-Up Tax, and the Undertaxed Profit Rule, in order to put this system into effect. Furthermore, it may be required to adjust the Double Taxation Avoidance Agreements in order to make room for the Pillar Two architecture.

Developing nations such as India may impose taxation on intra-group payments with nominal corporate income tax rates lower than 9 percent by implementing the Pillar Two system. It permits the collection of a 6% top-up tax by low-tax areas.

The multinational framework that the Organization for Economic Co-operation and Development (OECD)'s 140 member nations agreed upon is in line with the Pillar Two system. Since 2007, India has become an important OECD partner. 27 nations have already updated their national legislation to reflect these developments.

This development has not been independently confirmed by Moneycontrol.