Tax policymakers in Latin America and the Caribbean will be forced to reflect on the effectiveness of preferential tax regimes or the effectiveness of tax incentives for attracting foreign direct investment.
During the G20 meeting held on 13 October in Rome, Italy, the G20 finance ministers endorsed the proposals of the OECD-G20 BEPS Inclusive Framework Project on the two pillars to address the taxation challenges of the digital economy in the 21st century.
After years of negotiations and the proliferation of unilateral measures, 136 states out of the 140 that make up the Inclusive Framework of the BEPS Project ratified the proposals developed on the two pillars, it is important to note that only four states of the Inclusive Framework have not adhered to this agreement (Kenya, Nigeria, Pakistan and Sri Lanka).
With the ratification of the agreement, the implementation of the so-called "Pillar I" is expected, which aims at attributing the profits of multinational groups to market jurisdictions (nexus criterion) for multinational groups with a turnover of more than 20 billion dollars and a profit margin of more than 10%. The OECD expects $125 billion to be reallocated to market jurisdictions, with only the extractive industry and regulated financial sectors excluded from the scope of "Pillar I".
It should be noted that the attribution of benefits under the nexus criterion with the implementation of Pillar I will apply when multinationals generate revenues in any market jurisdiction in excess of USD 1 million. However, for countries with a GDP of less than $40,000 billion, the nexus criterion will apply when multinationals have revenues in excess of $250,000.