Pillar Two Calculation

The substance-based income exclusion favours capital intensive and certain low profit margin companies. These companies stand to benefit the most.

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.

MNE groups should pay careful attention to any group financing companies in light of the Pillar Two Rules. In this analysis we look at the impact of Pillar Two under for both general GloBE and QDMTT purposes.

Permanent Establishments (PEs) are subject to a number of specific rules under Pillar Two in order to apply the general provisions to them. Key issues are what is a PE under Pillar Two? where is it located? and how are income and taxes allocated to it?

On July 3, 2024, the Italian Ministry of Economy & Finance issued a Decree which contains the procedures for the implementation of the Qualified Domestic Minimum Top-up Tax (QDMTT).

The Fourth Set of OECD Administrative Guidance (issued on June 17, 2024) includes guidance on the treatment of Securitization Entities.

Section 5 of the Fourth Set of OECD Administrative Guidance (published on June 17, 2024) provides clarifications on the allocation of both profits and taxes of Flow-through Entities (including both hybrid entities and reverse hybrid entities). Most of these changes are to ensure the consistent matching of income and taxes in the same entity.

On June 17, 2024, the OECD provided more information on the Transitional Qualification Mechanism for determining the qualified status of IIRs and Domestic Minimum Taxes