G7 exempts US' MNCs from key provisions of global minimum tax pact

The new proposal will allow US firms to be taxed only domestically, on both foreign and local profits, rather than face additional taxes overseas.

The G7 announcement was released by Canada, which currently holds the rotating presidency.

The system intends to “provide greater stability and certainty in the international tax system moving forward,” a G7 statement said.

The decision follows the United States dropping section 899, a controversial clause in US President Donald Trump’s tax bill, which had proposed retaliatory taxes on foreign companies operating in the United States.

Trump had earlier pulled the United States out of the 2021 global tax deal brokered by the Organisation for Economic Cooperation and Development (OECD) through an executive order.

The new framework recognises existing US tax laws, specifically its domestic minimum tax, and offers a carve-out from the OECD’s income inclusion rule (IIR) and undertaxed profits rule (UTPR).

The US treasury department said on microblogging platform X that this side-by-side approach would "preserve important gains made by jurisdictions inside the inclusive framework" and that it looks forward to developing this solution further through constructive discussions.

The agreement now awaits further deliberation at the OECD level to determine how exemptions firms will be formally recognised under the global tax regime.

ALCHEMPro News Desk (DS)