Yesterday, the Government of The Bahamas released its draft Domestic Minimum Top-Up Tax Bill, 2024 (the “Bill”) for public consultation. The Bill aims to introduce a qualified domestic minimum top-up tax (DMTT) on large multinational enterprises (MNEs) with at least €750 million or equivalent in annual turnover, to come into effect for fiscal years beginning on or after December 31, 2023. The Bill will not apply to constituent entities of in-scope MNEs until fiscal years beginning on or after January 1, 2025, unless such groups are subject to an income inclusion rule (IIR) or undertaxed profits rule (UTPR) in another jurisdiction.
Section 3(1) of the bill immediately clarifies that the introduced DMTT must meet the requirements of the OECD Inclusive Framework. As set out in the government’s consultation paper, over 130 countries, including The Bahamas, have agreed to the two-pillar solution combatting base erosion and profit shifting. Through Pillar Two, the Inclusive Framework serves that cause by calling for all in-scope MNEs to pay tax at a minimum effective rate of 15% on profits earned in jurisdictions in which they operate.
The amount of DMTT payable will be calculated by reference to the jurisdictional top-up tax formula found in Article 5.2.3 of the OECD’s GloBE Model Rules attached to the Bill in its schedule, where a DMTT functions to replace the top-up tax payable against excess profits under those rules. Excess profits mean the difference between net GloBE income and the substance-based income exclusion. Deductions from net GloBE income are permitted for both eligible payroll costs and the carrying value of eligible tangible assets at a fixed percentage which reduces on a sliding scale for the 10-year transition period ultimately becoming 5.0% in fiscal years beginning in 2033.
Overall, the DMTT will mirror the calculations of net GloBE income and the substance-based income exclusion as provided in Chapter 3 of the GloBE Model Rules. The Financial Secretary for The Bahamas is expected to provide tax guidance (section 11) and advance tax rulings (section 12) to assist in-scope enterprises. Provisions of the GloBE Model Rules pertaining to an IIR or a UTPR will generally not be applied in The Bahamas.
In-scope enterprises will have fifteen months from the end of their fiscal years to file the relevant return with the Department of Inland Revenue. The Government is inviting comments to its consultation until September 16, 2024, for finalisation of the draft legislation by October 9, 2024. The Government provides welcome clarity on the implementation of the GloBE Rules following announcements made earlier this year.
Please find the Bill and consultation paper here
Yesterday, the Government of The Bahamas released its draft Domestic Minimum Top-Up Tax Bill, 2024 (the “Bill”) for public consultation. The Bill aims to introduce a qualified domestic minimum top-up tax (DMTT) on large multinational enterprises (MNEs) with at least €750 million or equivalent in annual turnover, to come into effect for fiscal years beginning on or after December 31, 2023. The Bill will not apply to constituent entities of in-scope MNEs until fiscal years beginning on or after January 1, 2025, unless such groups are subject to an income inclusion rule (IIR) or undertaxed profits rule (UTPR) in another jurisdiction.
Section 3(1) of the bill immediately clarifies that the introduced DMTT must meet the requirements of the OECD Inclusive Framework. As set out in the government’s consultation paper, over 130 countries, including The Bahamas, have agreed to the two-pillar solution combatting base erosion and profit shifting. Through Pillar Two, the Inclusive Framework serves that cause by calling for all in-scope MNEs to pay tax at a minimum effective rate of 15% on profits earned in jurisdictions in which they operate.
The amount of DMTT payable will be calculated by reference to the jurisdictional top-up tax formula found in Article 5.2.3 of the OECD’s GloBE Model Rules attached to the Bill in its schedule, where a DMTT functions to replace the top-up tax payable against excess profits under those rules. Excess profits mean the difference between net GloBE income and the substance-based income exclusion. Deductions from net GloBE income are permitted for both eligible payroll costs and the carrying value of eligible tangible assets at a fixed percentage which reduces on a sliding scale for the 10-year transition period ultimately becoming 5.0% in fiscal years beginning in 2033.
Overall, the DMTT will mirror the calculations of net GloBE income and the substance-based income exclusion as provided in Chapter 3 of the GloBE Model Rules. The Financial Secretary for The Bahamas is expected to provide tax guidance (section 11) and advance tax rulings (section 12) to assist in-scope enterprises. Provisions of the GloBE Model Rules pertaining to an IIR or a UTPR will generally not be applied in The Bahamas.
In-scope enterprises will have fifteen months from the end of their fiscal years to file the relevant return with the Department of Inland Revenue. The Government is inviting comments to its consultation until September 16, 2024, for finalisation of the draft legislation by October 9, 2024. The Government provides welcome clarity on the implementation of the GloBE Rules following announcements made earlier this year.
Please find the Bill and consultation paper here
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