OECD Pillar Two model rules are designed to ensure that large multinational enterprises pay a minimum level of tax on income arising in every jurisdiction they operate in. These rules are ambitious in scope and reach, designed to accommodate diverse international tax systems, tax consolidation rules, income allocations, entity classification rules and business structures.
Global tax reform at this scale changes so many aspects of how multinationals pay tax, manage increasing data needs, calculate tax liabilities and report under both financial reporting and tax compliance requirements. The OECD has recently published short-term, transitional safe harbors. Some of these are likely to become permanent; companies will need to review and monitor safe harbor frameworks to understand which apply over time. The OECD Inclusive Framework is also exploring dispute prevention and other mechanisms for increasing tax certainty.
As you are most likely aware, the new Pillar Two ruleset is complex. It includes:
Given the complexity and potential impact of the new requirements, global corporations will need to take an informed, proactive approach to compliance—developing a clear understanding of the rules; conducting detailed assessments; and rolling out a targeted, compliant response backed by the necessary data, technology, processes and resources. To make sure your business is prepared:
With so much at stake, clarity and thoughtfulness are a must. To that end, here are the Pillar Two data types, calculation considerations, and reporting requirements to evaluate now to ensure compliance with current and upcoming OECD directives.
Pillar Two requires more than 100 accounting, tax and company data points per entity, including:
To capture all these data points, you need to interpret the definitions for your group, know where your data resides, how you'll access it, and how you plan to address any gaps. And remember that while Pillar Two demands a lot, it also offers an opportunity to increase data accuracy, automate the reporting process, and possibly improve your tax positions and planning.
To comply with new, more complicated tax rules, you’ll need to:
It's unlikely that your current tax technology can support all of your Pillar Two data, calculation and reporting needs. And in the absence of off-the-shelf solutions, it's important to figure out exactly which enhancements can fill the gaps.
The OECD is in the process of finalising a standardised information return. In the meantime, the public consultation document published by the OECD contains a comprehensive set of required data points, including general information about the group and filing entity, effective tax rate (ETR) computation and top-up tax and top-up tax allocation and attribution.
The initial filing deadline is 18 months after year-end for the first year a company is in scope; subsequent deadlines will by 15 months after year-end. To stay informed, closely monitor the standardised return and additional filing information as it becomes available.
Deloitte’s OECD Pillar One and Pillar Two Tax Advisory service brings together the deep expertise of Deloitte tax specialists and the analytical power of our data and technology solutions to help multinational businesses assess and evaluate the tax implications of global tax reform. We offer support for everything from initial gap assessment to tax impact analysis to implementation, including these end-to-end services: