The Pillar Two Rules include specific provisions in Article 6.2 of the OECD Model Rules that apply to share acquisitions and disposals of group companies.
Transfers of assets are subject to different rules at: Intra-Group Asset Transfers.
The general rule, as is often the case with the Pillar Two rules, is that the accounting treatment is followed.
As such, if any part of a company’s assets, liabilities, income of expenses are included in the UPE consolidated accounts, it is treated as part of the MNE group.
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On May 13, 2024, the Finance Bill, 2024 was sent to the Kenyan Parliament. It includes provisions to introduce a 15% domestic minimum top-up tax from January 1, 2025.
The Pillar Two Rules include specific provisions for tax transparent entities to avoid artificially low effective tax rates and significant top-up tax, particularly for tax transparent UPEs.
Centralized HR/payroll companies are frequently used by MNE groups but raise specific issues in relation to the Pillar Two GloBE Rules. In particular, the impact of using a centralized function and the nature of recharges could have an impact on the substance-based income exclusion of group entities.
Whilst the treatment of investment property for financial accounting purposes is important when determining the GloBE treatment, of even more importance are any differences between the financial accounting treatment and the domestic tax treatment.
The Transitional CbCR Safe Harbour is a short-term measure that will allow an MNE to avoid undertaking detailed GloBE calculations for a jurisdiction if certain requirements are met. Data will need to be extracted from the CbC Report, financial statements and ERP and EPM systems. Group structure information will also be required.
On May 2, 2024, the Estonian Official Gazette enacted the ‘Act supplementing the Tax Information Exchange Act, the Tax Administration Act and the Income Tax Act’ to implement Article 50 of the EU Minimum Tax Directive.
Analysis of the implementation of the Pillar Two GloBE rules for Canada, updated for the Budget Implementation Bill, 2024, No. 1, issued on April 30, 2024.
Whether multinationals adopt a centralized or decentralized approach to Pillar Two will be one of the key factors in correctly establishing the systems and architecture to collect, manage, analyse and store source data for the Pillar Two effective tax rate and top-up tax calculation.
The Pillar Two effective tax rate (ETR) calculation for investment entities is similar to the standard ETR calculation, however, there is an important twist in that the top-up tax is adjusted for minority interests. There is no adjustment for minority interests under the standard ETR calculation. In this article we look at the impact of this.
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