The Subject-to-Tax Rule under Pillar Two

Abstract

In this article, the author discusses the subject-to-tax rule (STTR), which is the last of the rules to be released that are part of the agreement on Pillar Two. Building upon the analysis of the design, operation and scope of the STTR, as well as the meaning and computation of the tax rate for the purposes of achieving a minimum level of tax, the author concludes that the recently proposed STTR may not be the ideal solution for developing countries to protect themselves against BEPS structures and raise revenues in the global agreement, not only because of its limited scope and high level of complexity, but also because of the impacts of implementing the two-pillar solution and of the shortcomings the rule entails in relation to the GloBE rules.