Pillar Two
The Pillar Two Model Rules released by the OECD introduce a new minimum tax rate of 15% on a jurisdictional basis. MNEs with a consolidated annual revenue of EUR 750 million or more fall within the scope of Pillar Two.
The rules are planned to take effect on December 31st, 2023, making FY23 the first financial year to be in scope of the GloBE rules. This also implies that FY22 is a critical time for determining the basis for FY23.
As the GloBE rules are more complex due to deviations from general accounting standards, it is vital that MNEs already start considering their approach to Pillar Two.
TPA has identified three steps that are essential for Pillar Two compliance:
Evaluating and improving the tax accounting & data consolidation process
Primarily, Pillar Two requires a solid tax accounting process for the provision of data used in the calculation of the ETR under the GloBE rules. This process includes locating the required data and performing a GAP analysis to identify missing data points.
MNEs also need to streamline their data collection & processing, enhance the quality of the data, and reclassify the data where necessary.
Using the right model for calculating the Pillar Two top-up tax
By using the data in a financial model derived from the GloBE rules, we are able to calculate the Covered Tax and GloBE income.
Subsequently, this helps us determine the final ETR impact and, therefore, top-up tax within the group on a jurisdictional basis.
Considering the impacts of Pillar Two
By running what-if scenarios, we can help MNEs consider the impacts of Pillar Two and factor those forecasts into their business planning for the future. This also helps us optimize the ETR.
Our specialists can advise your business and help you understand the implications of the new Pillar Two GloBE Rules for an adequate preparation before the rules take effect.
Submit an RFP
Get trained
