Pillar One is meant to address the tax challenges arising from the digitalization of the economy. The most important element of Pillar One is Amount A, which introduces a new taxing right over a portion of the residual profits of large and highly profitable enterprises for jurisdictions in which goods or services are supplied, or where consumers or users are located.

The rules on the administration of the new taxing right and the updated tax certainty related provisions have now been released for public consultation. Unlike the rules on tax certainty, those on the administration aspects of Amount A are being released for public consultation for the first time.

For an overview of previously published building blocks of Pillar One’s Amount A, we refer to our publications of 7 February 2022 (Nexus and revenue sourcing rules), 24 February 2022 (Tax Base Determination), 20 April 2022 (Scope and the Extractives Exclusion), 22 June 2022 (Tax Certainty Framework) and 23 August 2022 (July Progress Report).  


On 6 October 2022, the OECD published a progress report with draft rules on the Administration and Tax Certainty Aspects of Amount A of Pillar One (Progress Report). The Progress Report is divided in three parts:

  • Part I covers the administration process for Amount A: The detailed procedures of how in-scope groups will comply with the Amount A rules, from the filing of the relevant information to payment of tax and access to timely relief from double taxation.
  • Part II covers the tax certainty framework for Amount A: A central element of Amount A is an innovative tax certainty framework which guarantees certainty for in-scope groups over all aspects of the new rules, including the elimination of double taxation.
  • Part III covers tax certainty for issues related to Amount A: In-scope groups will also benefit from dispute prevention and resolution mechanisms, which are intended to avoid double taxation for all issues related to Amount A (e.g. transfer pricing and business profits disputes), in a mandatory and binding manner.

In addition to a detailed description of the OECD’s ideas and points for discussion with the Inclusive Framework (IF), the Progress Report also includes specific Model Rules (MRs) and their relevant commentaries for potential adoption. The proposed rules reflect the technical work conducted by the OECD so far and do not yet reflect the consensus views of the IF.

Administration process for Amount A

The development of the administration framework for the new taxing right is based on three principles: (i) administration and compliance should be streamlined and coordinated avoiding any unnecessary duplication; (ii) where possible, tax administrations should be able to deal with Amount A without significant modifications of their systems/infrastructure; and (iii) enforcement and double taxation relief should be ensured. 

Since Amount A operates as an overlay to the existing corporate income tax rules and follows a group-based approach, the IF has been considering approaches with respect to the interaction of Amount A with existing entity-based corporate tax regimes. The Progress Report notes that:

  • Amount A income is to be included in the income tax base of market jurisdictions: Market jurisdiction must tax Amount A with an income tax regime or equivalent. Jurisdictions will be free to self-determine to either tax Amount A income under their current income tax regimes or through a separately levied income tax.
  • A harmonized approach for Amount A’s administration: Despite the flexibility provided to jurisdictions to self-determine how Amount A will be incorporated in their domestic tax base, in several areas a “harmonized administrative approach” is warranted by the MRs. Part I of the Progress Report outlines each of the areas of this “harmonized administrative approach” of the MRs (Articles 12 – 19) with a detailed discussion on their application.
  • Information filing requirements for Amount A: An entity liable to tax on Amount A or eligible for double taxation relief will be required to submit documentation to tax administrations that outlines the relevant calculations and additional information in relation to Amount A (i.e. Amount A Tax Return and Common Documentation Package)
  • Amount A income is to be subject to general administrative procedures: The current administrative rules in each jurisdiction (i.e. income tax filings, assessments and penalties) will apply to Amount A income and double taxation relief, unless concessional or harmonized treatment is provided for by MRs. Jurisdictions will be able to self-determine how to tax Amount A income and implement double taxation relief, subject to guardrails outlined in the MRs and Multilateral Convention (MC).
  • Amount A income liabilities in market jurisdictions: An entity that is required to include Amount A income in its taxable income in a market jurisdiction will be legally liable to tax in that jurisdiction on that Amount A income. Unless specifically modified under the MRs, the entity will have the same domestic tax obligations as any other taxpayer. Nevertheless, it is expected that most Amount A liabilities will be eligible for streamlined filing in market jurisdictions through the centrally filed Amount A Tax Return and Common Documentation Package mentioned above.
  • Double taxation relief for Amount A in relieving jurisdictions: Given the complexity of foreign tax credit or exemption regimes and their potential interaction with other domestic tax rules, the Progress Report provides flexibility to individual jurisdictions to determine how double taxation relief should be provided. It states that double taxation relief in relation to Amount A shall be given through the income tax base of relieving jurisdictions and therefore will need to interact with current domestic income tax rules (e.g. extension of current foreign source income exemptions or foreign tax credit regimes). The Progress Report acknowledges a timing mismatch between the moment in which Amount A liability can be calculated for the relieving jurisdiction, versus when it can actually be paid in the market jurisdiction. It further notes that this timing issue may be further exacerbated where the period in which Amount A is calculated (i.e. the Ultimate Parent Entity’s fiscal year) and the tax year of the relief entity are not aligned. In some situations relief entities may not have enough taxable income in the relieving jurisdiction for the relevant tax year to be fully refunded for Amount A liabilities in market jurisdictions.
  • Identifying the taxpayer’s in market jurisdictions and relief entities in relieving jurisdictions (“single” vs “multiple” taxpayer approach): The Progress Report acknowledges the lack of agreement within the IF regarding the process of identifying the taxpayer/s in market jurisdictions and relief entities in relieving jurisdictions. Regarding this element, it mentions that two approaches have been identified to integrate Amount A and the entity-based income tax system: (1) the “single taxpayer” approach, in which a single entity in each covered group is liable for the Amount A tax in all market jurisdictions, and that entity may be a different one than the entity/ies  entitled to relief from double taxation; and (2) the “multiple taxpayer” approach, in which one or more entities from each jurisdiction that is required to eliminate double taxation (Relieving Jurisdictions) are liable for the Amount A tax, and a single group entity coordinates payment and compliance as an agent on their behalf. Since this is a pending issue, the MRs were drafted to accommodate both approaches. The Progress Report provides an overview of how both approaches will work from an administration perspective.

Updated Tax Certainty Framework for Amount A

The consultation document published in May 2022 had already proposed the introduction of a tax certainty framework for Amount A which aims to guarantee certainty for in-scope groups and tax administrations over all aspects of the Pillar One rules, including whether a group is in-scope, or qualifies for double taxation relief. The latest Progress Report retains the following three voluntary mechanisms for groups:

  • A Scope Certainty Review: a process to provide an out-of-scope group with certainty that it is not in-scope of rules for Amount A for a period, removing the risk of unilateral compliance action in jurisdictions where it sources revenues.
  • An Advance Certainty Review: a process to provide certainty over an in-scope group’s methodology for applying aspects of the new rules that are specific to Amount A, and relevant aspects of its internal control framework, which will apply for a number of future periods.
  • A Comprehensive Certainty Review: a process to provide an in-scope group with binding multilateral certainty over its application of all aspects of the new rules for a period that has ended, based on a standardized Common Documentation Package and building on the outcomes of any advance certainty applicable for the period. This will guarantee a consistent treatment of the group and the full elimination of double taxation in all parties to the convention for groups who cooperate in the process and accept the outcomes of a review.

All three mechanisms are supported by a binding determination panel process to resolve any disagreements that arise. In addition, the Progress Report mentions that IF is considering a transitional process to apply for a specific limited period to support groups in applying the new rules and ensure a soft-landing. Finally, the proposed tax certainty framework includes a possibility for tax administrations to agree to work multilaterally and agree a common approach through a coordinated review in the absence of a request from a group.

Tax Certainty for Issues Related to Amount A

Part III of the Progress Report contains draft provisions on tax certainty for issues “related to Amount A”. The term ‘Related Issues’ means issues that have a current or potential impact on the application of Amount A by the covered group and are covered under the provisions of an existing tax agreement.

The provisions set out a mandatory and binding mechanism that will be used to resolve transfer pricing and permanent establishment (PE) profit attribution disputes that competent authorities are unable to resolve through the mutual agreement procedure (MAP) within two years of the presentation of the MAP case to the competent authorities.

The main proposed provisions (where MRs still have to be consulted and agreed) described by the Progress Report in relation to Tax Certainty for Issues Related to Amount A are the following:

  • Article [X] (Mutual Agreement Procedure – Existing Tax Agreement): This article is intended to reinforce the general principle that access to the MAP for taxation connected with Related Issues should be as widely available as possible. Article [X] does so by providing covered groups with the possibility to ensure that decisions as to whether a case should proceed to the second stage of the MAP (i.e. be discussed by the competent authorities of both contracting jurisdictions) are open to consideration by both competent authorities. This article functions as a backstop to the MAP provisions of existing tax agreements, helping to ensure that both competent authorities are made aware of MAP requests and have the opportunity to provide their views on whether a MAP request should be accepted or rejected and on whether the taxpayer’s objection is considered to be justified.
  • Article [Y] (Mutual Agreement Procedure – No Existing Tax Agreement): This proposed article applies in cases where there is no existing bilateral treaty. This article provides an OECD/UN style MAP process in cases there is a Related Issue. It gives a member of a covered group the opportunity to present its Related Issue to the competent authorities of both relevant contracting jurisdictions.
  • Article [Z] (Definitions): This article provides several definitions necessary for the operation of the tax certainty mechanism.
  • Article 19 (Resolution of disputes with respect to Related Issues): This article contains the core dispute resolution provision in this section, which consist of requesting the involvement of a dispute resolution panel. It follows the current process for arbitration under double tax treaties with some modifications (e.g. dispute resolution panels will, by default, apply a last-best offer (also known as final offer) approach to decision-making). Article 19 provides that, where the competent authorities are unable to reach an agreement on a case in the MAP within a period of two years, unresolved Related Issues arising from the case will, at the request of the member of a covered group who presented the case, be submitted to a dispute resolution panel in the manner described therein.

Article 20 (Elective binding dispute resolution panel mechanism): This article establishes a set of four objective criteria that define the contracting jurisdictions eligible to use an elective binding dispute resolution mechanism in lieu of the mandatory binding dispute resolution mechanism provided in Article

  • Contracting jurisdiction must satisfy all of these four criteria to be eligible to use the elective binding dispute resolution mechanism
  • Annex III.A. (Process Map): The annex offers a process map which visually describes the different parts of the procedure.

What can taxpayers do? 

Based on the Progress Report, taxpayers that expect to be in scope of Pillar One can assess whether the Administration and Tax Certainty aspects of Amount A provide them sufficient comfort and assess the expected impact of these elements on their businesses. Loyens & Loeff can assist in preparing a Pillar One Impact Assessment Model to allow you to assess the full scope of the currently published rules on your business.

We aim to provide input on the Pillar One public consultations based on our experience and those of our clients. Therefore, do not hesitate to reach out if we can raise any issues you expect to encounter in the response to this consultation.

We will keep you informed about further developments. Should you have any questions or need assistance in assessing the impact of the rules, please contact a member of our Pillar One team or your trusted Loyens & Loeff adviser.