CRA Insights

OECD releases “unified approach” proposal for taxation of digital economy that extends to all consumer based industries

October 18, 2019

On October 9, 2019, the Organisation for Economic Co-operation and Development (OECD) Secretariat published its proposal for a “unified Approach” under Pillar One of “Programme of Work to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalisation of the Economy “ (the Proposal). The Proposal expands the taxation rights to jurisdictions where certain “large and highly profitable” multinational enterprises (MNEs) have significant consumer-facing activities. It is worth emphasizing that this Proposal’s approach applies to highly digital business models and more broadly focusses on consumer-facing businesses.

The Proposal introduces two new rules: (i) a new nexus rule that would be applied to the activities of highly digitalized consumer-facing businesses conducting their activities with no or limited physical presence to the market jurisdiction; and (ii) a new profit allocation rule that goes beyond the traditional “arm’s length principle.”

Click here to read the public consultation document.

Interested parties are invited to send comments no later than Tuesday, 12 November 2019, 12:00 (CET), by e-mail to in Word format. Further discussions will be held during a public consultation meeting at the OECD on 21 and 22 November 2019.

While it is not necessary or practical for taxpayers to immediately change their tax structure or transfer pricing policies, large consumer-facing MNEs should closely monitor the discussion and outcomes of the OECD’s initiative.

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