In October 2021, more than 135 countries, including the UK, reached an agreement known as Pillar 2 to ensure that the largest corporate groups will be subject to a minimum rate of tax by enacting a global minimum corporate tax rate of 15%.
As part of that agreement, the government has introduced 2 new taxes in the UK: the Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT). These taxes apply to accounting periods beginning on or after 31 December 2023.
A new IT system is being developed to administer the new taxes. Companies are now able to register for the taxes.
Contacts
If you have a technical question about the implementation of the Multinational Top-up Tax or the Domestic Top-up Tax, you can email us.
Brief
On October 2021, 135+ countries agreed on Pillar 2 to set a global minimum corporate tax rate of 15%. The UK government introduced Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT) for accounting periods starting after December 31, 2023. A new IT system is being developed to administer these taxes, with companies able to register for them as of now. The implementation of the MTT and DTT will be governed by HMRC.
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Purpose
The introduction of Pillar 2, a global minimum corporate tax rate of 15%, aims to ensure that large corporate groups contribute a fair share of tax revenue. In response, the UK government has implemented two new taxes: the Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT), which will be administered through a new IT system.
Effects on Industry
The implementation of MTT and DTT is expected to have significant effects on industries and companies that operate globally or domestically. The introduction of a minimum tax rate of 15% will increase the tax burden on multinational corporations, potentially impacting their profitability and competitiveness. Additionally, domestic businesses may also be affected as they are subject to the Domestic Top-up Tax.
Relevant Stakeholders
The new taxes will directly affect large corporate groups operating in the UK, including those with a global presence. Businesses with taxable profits above £250 million will be required to pay the Multinational Top-up Tax, while domestic companies will be subject to the Domestic Top-up Tax. The government has also announced that companies can now register for these taxes.
Next Steps
To comply with the new tax regulations, businesses must ensure they are registered for the MTT and DTT by accounting periods beginning on or after 31 December 2023. Companies should also be aware of the development of a new IT system to administer these taxes. Any technical questions about the implementation can be directed to the relevant authorities.
Any Other Relevant Information
The UK government has stated that the introduction of MTT and DTT is part of its broader efforts to modernize the tax system and ensure fairness in taxation. The new taxes are expected to contribute to the country’s revenue and help address the challenges posed by the COVID-19 pandemic.
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