Bulgaria’s Council of Ministers approved a letter of intent to join the Multilateral Convention for Implementing the Pillar Two Subject to Tax Rule (STTR MLI) on 11 September 2024.
The signing ceremony for the STTR MLI is set to take place on 19 September 2024, the letter of intent is anticipated to be signed by Bulgaria’s Minister of Finance.
Adopted by the OECD Inclusive Framework on Base Erosion and Profit Shifting last September and opened for signature in October 2023, the STTR MLI aims to streamline the implementation of the subject-to-tax rule in bilateral tax treaties.
The STTR MLI aims to help developing countries protect their tax base by allowing the implementation of the subject-to-tax rule in existing bilateral tax treaties without the need for bilateral negotiations. It enables source countries to “tax back” when intra-group income is taxed below the 9% STTR minimum rate and taxing rights have been ceded under a treaty.
The subject-to-tax rule is a key component of Pillar Two in the global corporate tax reform plan, developed by the Inclusive Framework to address tax challenges from the digitalisation of the economy. It permits developing countries to tax interest, royalties, and other specified payments, including intragroup transactions, when they are subject to a corporate income tax rate below the minimum threshold.
