The Subject to Tax Rule (STTR) is an integral part of the consensus achieved on Pillar Two and is especially important for developing Inclusive Framework members. Pillar Two comprises: the Global anti-Base Erosion Rules (GloBE Rules) and a treaty-based rule, the STTR. The STTR complements the GloBE rules and adapts the underlying principles and mechanisms to a treaty context. The STTR allows source jurisdictions to “tax back” where defined categories of intra-group covered income are subject to nominal corporate income tax rates below the STTR minimum rate, and domestic taxing rights over that income have been ceded under a treaty. The STTR report contains a model treaty provision to give effect to the STTR, together with an accompanying commentary explaining the purpose and operation of the STTR.
Subject to Tax Rule
The Subject to Tax Rule (STTR) is a key component of Pillar Two of the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. The STTR is a treaty-based rule that protects the right of developing Inclusive Framework members to tax certain intra-group payments, where these are subject to a nominal corporate income tax that is below the minimum rate.
Key messages
In September 2023, the OECD/G20 Inclusive Framework on BEPS concluded negotiations on the Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule ("STTR Multilateral Instrument" or "STTR MLI"). The STTR MLI can swiftly implement the Pillar Two Subject to Tax Rule in existing bilateral tax treaties without the need for bilateral negotiations.
The STTR MLI is open for signature and jurisdictions interested in signing it are invited to contact the OECD Secretariat: oecd.sttr@oecd.org.
