The Association of International Certified Professional Accountants (AICPA) has formally requested guidance regarding the implementation of the Pillar Two framework, which is part of the recent G7 agreement on a Global Minimum Tax.
This framework is intended to operate alongside the US tax regulations for Multinational Enterprises (MNEs) and in conjunction with the Organisation for Economic Co-operation and Development (OECD) standards.
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In its letter, the AICPA stresses the importance of timely guidance, and also raises issues related to substance-based non-refundable tax credits, specifically referencing the US section 41 research credit.
The G7 agreement aims to shield US MNEs from certain international tax regulations that could lead to increased tax liabilities, potentially resulting in double taxation.
The Pillar Two framework is designed to curb tax avoidance strategies that involve shifting profits to jurisdictions with lower tax rates.
However, the AICPA cautions that the current formulation of these rules may adversely affect US companies, leading to confusion and also to heightened compliance expenses.
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By GlobalDataAdditionally, the association points out that US tax credits, such as the section 41 research credit, may not receive equitable treatment compared to similar incentives offered in other nations, which could therefore deter innovation and investment in the US market.
The AICPA is advocating for clear and consistent guidance from international tax authorities, equitable treatment of US tax credits, and the application of prompt measures to reduce unnecessary costs and complexities for businesses adapting to the evolving tax environment.
Reema Patel, senior manager for tax policy and advocacy at AICPA said: “The G7 agreement has been broadly welcomed by the US business community, however until the agreement is finalised, companies must continue to comply with the reporting obligations.
“The Association recommends the OECD and Treasury issue harmonised guidance to minimise unnecessary administrative and reporting costs for US-based MNE groups.”
