Pillar Two: Transitional Simplified Reporting Election

The Transitional Simplified Reporting Election was included in the OECD GloBE Information Return Guidance. 

It provides for a simplified jurisdictional reporting mechanism for Fiscal Years beginning on or before December 31, 2028 but not including a Fiscal Year that ends after June 30, 2030.

It’s purpose is to give MNE Groups additional time to develop their IT and accounting systems to accommodate reporting on a constituent entity (CE) basis.

MNE Groups can elect for a simplified jurisdictional reporting framework for jurisdictions where:

-no Top-up Tax liability arises; or

-Top-up Tax liability arises but it does not need to be allocated on a CE-by-CE basis.

Where the election is made, the MNE Group is not required to report all adjustments to the Financial Accounting Net Income or Loss, current tax expense or deferred tax expense on a CE-by-CE basis (other than in respect of a few specific items) and all adjustments can be reported on a net basis. 

It therefore does not apply where a Top-up Tax liability arises and needs to be allocated on a CE -by-CE basis. 

Note that the election only applies for reporting purposes. When the GloBE Rules require a calculation to be undertaken at the CE level,  this calculation still needs to be done at the CE level even if the information is then reported in an aggregated format in the GIR.