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Tax News

H.R. 5376 Inflation Reduction Act of 2022

On August 16, 2022, the President signed into law the Inflation Reduction Act of 2022, which provides reconciliation of the federal budget and a few changes in the tax law to reduce deficit.  Beginning tax years after December 31, 2022, an Alternative Minimum tax of 15% is imposed to certain large corporations, excluding S corporations, regulated investment companies, and REITs, with an  average annual financial income exceeding $1 billion over a three taxable year period. In addition, a 1% excise tax is imposed on corporate stock repurchases post December 31, 2022.  The bill also extends and provide new energy tax credits and includes climate change and health care reforms.

OECD Pillar Two - Global Anti-Base Erosion Model Rules

Over 140 countries joined in collaboration to avoid large multinational businesses from shifting profits and avoiding tax on its worldwide profits.  An international tax reform Pillar Two evolved to ensure taxation and fair share of multinational companies.Beginning in 2023, large multinational companies, defined as companies with consolidated group revenue exceeding 750 million Euros in the two of the four prior years, will need to pay global minimum tax on its profits.  OECD Pillar Two imposes global minimum tax to ensure that large multinational companies pay a minimum effective tax rate of 15% on profits in each country they have operations.

The following are considerations on the calculation of the global minimum tax: 

1. Scope - entities included 

2. Charging Provisions - Income Inclusion Rule or Undertaxed Profits Rule

3. GloBE income or loss - financial accounting net income +/- adjustments

4. Adjusted covered taxes

5. Effective tax rate by jurisdiction

6. Top-up tax

7. Administration

8. Transition Rules

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