New OECD Guidance Gives Relief for US Renewable Credits

The OECD’s new guidance on the global minimum tax provides relief to US multinational enterprises but doesn’t preclude some from eventually paying tax on their US profits, say EY’s Barbara Angus and Jason Yen.

New administrative guidance from the OECD’s inclusive framework on base erosion and profit shifting, released on July 16, 2023, builds on prior guidance.

It contains a safe harbor from the UTPR, known as the undertaxed profits rule, as it applies to the income of the ultimate parent entity jurisdiction. It also provides supplementary guidance on what constitutes a qualified domestic minimum top-up tax and the conditions for its safe harbor.

In addition, there are new rules on transferable tax credits and tax equity investments, as well as technical updates to currency conversion and the substance-based income exclusion computation rules.

The Organization for Economic Cooperation and Development also suggested that future guidance on the global anti-base erosion regime, or GloBE, may address the “asymmetrical treatment of items of income, expense or transactions between different accounting standards and tax rules including those used with respect to the transitional and permanent GloBE Safe Harbours.”

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This article was originally published by Bloomberg Tax. An excerpt is reprinted here with permission.