G7, agreement reached on global minimum tax: 'parallel solution' for the US

What the agreement reached in Canada provides. Minister Giorgetti: "Honorable compromise"

The G7 has reached an agreement on a global minimum tax, with a "side-by-side solution" for the United States , building on the US's 'side-by-side' proposal, which would exempt the income inclusion rule and the undertaxed profits rule , in recognition of the current US minimum tax rules. The Canadian presidency statement said that ''there is a shared understanding that a side-by-side system could preserve important gains made by jurisdictions in the inclusive framework in addressing base erosion and profit shifting and provide greater stability and certainty to the international tax system in the future''.

''The implementation of a side-by-side system will facilitate further progress in stabilizing the international tax system, including a constructive dialogue on the taxation of the digital economy and on safeguarding the fiscal sovereignty of all countries,'' the note reads.

The agreement is based on "our continued commitment to work together through the inclusive framework to address potential risks of base erosion and profit shifting," the statement said. The principles of the agreement, accepted by G7 members, include "a side-by-side system" that would "completely exclude US-controlled groups from the undertaxed profits and income inclusion rule with respect to their domestic and foreign profits."

''A side-by-side system - it is explained - would include a commitment to ensure that all material risks that could be identified in relation to the level playing field, or risks of base erosion and profit shifting, are addressed to preserve the common policy objectives of the side-by-side system. In parallel, ''work would be undertaken to establish a parallel system, bringing substantial simplifications to the overall governance and compliance framework of Pillar 2''.

The agreement would also see "work undertaken to create a parallel system, while simultaneously assessing changes to the Pillar 2 treatment of non-refundable substance-based tax credits, which would ensure greater alignment with the treatment of refundable tax credits."

Giorgetti: "Honorable compromise"

"The agreement formalized at the G7 on the global minimum tax is an honorable compromise found with the American administration that protects our companies from the automatic retaliations originally provided for by clause 899 of the Obbba under consideration by the US Senate. We must continue to work in this direction and encourage dialogue", commented the Minister of Economy, Giancarlo Giorgetti.