The envisaged solution consists of two pillars. Pillar 1 would allocate new taxing rights to market states. Pillar 2 seeks to to ensure a minimum taxation for multinational entities groups. On October 12, 2020, the ‚Inclusive Framework‘ released two reports on both pillars.
IFRS shouldn‘t be mandatory
GDV articulated concerns on how the effective tax rate of entities in foreign jurisdictions is to be computed. GDV accepts the idea to use financial accounts as a starting point but points out that insurance groups should not be forced to set up IFRS accounts solely for purposes of calculating the tax rate. Instead, other national accounting standards such as the German GAAP should also be accepted for purposes of the effective tax rate calculation.
Temporary differences between the financial accounts and the local tax base should be dealt with in a manner that takes account of the timing differences typically occuring in the insurance sector. The concept of tax carry forwards developed by the Inclusive Framework falls short of that. Discrepancies in the treatment of saving components in insurance premiums between IFRS and German GAAP should also be sensibly dealt with.
Another key issue is the so called "subject-to-tax rule" which would allow states to levy a withholding tax on certain payments made to corporations in low-tax jurisdictions. The inclusion of intra-group (re-)insurance premiums in the scope of the subject to tax rule would disregard the economic realities in the insurance sector and would likely result in over-taxation.