MNCs' India units gear up for new global minimum taxes
About 175 multinationals operating in India, which have consolidated global turnover of over Rs. 750 million, have undertaken a comprehensive review of their current tax structures and frameworks in anticipation of forthcoming regulations concerning global minimum taxation.
As per a PwC study, around 175 arms of multinationals operating in India qualify for consideration under Organisation for Economic Co-operation and Development (OECD) ) Base Erosion and Profit Shifting (BEPS) 2.0 Pillar Two regulations.
The rule applies to any multinational company that is part of a multinational group with annual revenue of Rs. 750 million or more in the consolidated financial statements of the ultimate parent entity for at least two of the four fiscal years just before the tested fiscal year.
Under the "Global Anti-Base Erosion" or "GloBE" Regulation, the Pillar Two Model Rules are crafted to ensure large multinational enterprises (MNEs) pay a minimum level of tax (at least 15%) on the income arising in each jurisdiction where they operate.
In India, Pillar Two provisions may be incorporated into either the February vote-on-account budget or the full-fledged budget in July, with the possibility of the government sharing a draft law or rules for consultation, say tax experts.
As per experts, Multinationals operating in India should not be impacted, as the lowest rate of corporate tax in India (on new manufacturing units) is above the minimum threshold of 15%. However, if any MNC has invested in India through an intermediate jurisdiction that happens to have a tax rate below 15%, there could be an additional tax impact for the MNC in its home country. Even in this structure, India will not obtain any additional tax revenues given the lowest rate of tax being over 15% in India.
