QDMTT’s Alignment With International Obligations With Potential Deviations

The introduction of a domestic top-up tax system ensures that the investment country has the primary taxing right to collect the tax necessary to reach the global minimum tax level. However, this makes certain types of income tax incentives redundant and makes some of the promises made to the investors in host countries unfulfillable, creating potential tension between qualified domestic top-up tax systems and international investment agreements (IIAs). The current article focuses on the tax strategies available to countries that minimize the conflict between Qualified Domestic Minimum Top-up Tax (QDMTT) and IIAs while meeting GloBE requirements. We examine in detail the global minimum tax consequences of the different types of incentives, the different scope and terminology of IIAs and GloBE, and the interaction of investment treaties and any GloBE induced changes in tax policy. We conclude that different tax incentives are favoured over others by GloBE, limiting countries’possibilities to form their tax policies. Since the incentives that are more in line with GloBE require more free cash from jurisdictions, modifying them could be challenging for developing countries without the necessary financial resources.