Income Tax Severed Letters

Principal Issues: Whether subsections 14(1), 14(3) and 15(1) of the Global Minimum Tax Act ("GMTA") align with the Tax Challenges Arising from the Digitalisation of the Economy - Global Anti-Base Erosion Model Rules (Pillar Two) (the "Model Rules"), given that subsection 14(1) of the GMTA simply provides that a person must pay top-up tax in an amount determined under subsection 15(1) of the GMTA if, among other conditions, the person is a "relevant parent entity," and that such term is defined in subsection 14(3) of the GMTA without expressly establishing any priority for a POPE to levy top-up tax.

Position: Yes, although the legislative structure differs, the combination of subsections 14(1), 14(3) and 15(1) of the GMTA produces the same "priority" for POPEs as per the application of the Income Inclusion Rule ("IIR") in Article 2.1 of the Model Rules and the IIR offset mechanism in Article 2.3 of the Model Rules.

Reasons: The GMTA and the Model Rules.