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.