Treasury Green Paper includes Pillar II Undertaxed Payments (UTPR) rule, corporation tax hike


On March 28, the Biden administration published the budget for the 2023 financial year, followed by Release of the Treasury Green Paper, which provides explanations of the Biden administration’s revenue proposals. Among the proposals is the adoption of the OECD Pillar II Undertaxed Payments Rule (UTPR) instead of the Base Erosion Anti-Abuse Tax (BEAT). The RUPT disallows a deduction or requires an equivalent adjustment to the extent that a constituent entity’s Pillar II Global Minimum Tax income is taxed below the 15% tax rate threshold.

The proposal would repeal the BEAT and replace it with a UTPR that conforms to the Pillar II model rules. When another jurisdiction adopts a UTPR, an additional national minimum tax would protect US income from the taxation of a UTPR by other countries. The UTPR would only apply to financial reporting groups that have aggregate annual revenue of $850 million or more in at least two of the previous four years.

Additionally, the Biden administration is proposing to increase the corporate tax rate to 28%, which would consequently increase the GILTI rate. Biden’s budget assumes changes to GILTI envisioned by House Speaker Building back better are enacted, bringing the effective GILTI rate to 20%, applied jurisdiction by jurisdiction. Such a change would see GILTI with a rate above the overall OECD Pillar II Minimum Tax of 15%.


Comments are closed.