How Pillar Two Applies To Trusts & Foundations
The Pillar Two rules don’t just apply to companies. They apply to ‘entities’. In this article we look at the application of Pillar Two to trusts and foundations.
The Pillar Two rules don’t just apply to companies. They apply to ‘entities’. In this article we look at the application of Pillar Two to trusts and foundations.
The Pillar Two Rules generally require transactions between entities located in different jurisdictions to be priced at an arms-length basis. However, special rules apply to unilateral transfer pricing adjustments given the risk of income either being taxed twice or not taxed at all.
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.
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 Pillar Two rules include specific rules for Joint Ventures (JVs) that would otherwise not be within the scope of Pillar Two due to not being consolidated in the financial accounts of the MNE group. However, of more interest is how the amount of top-tax tax (and by implication the amount not collected) varies depending on the JV group structure. Read more in this article.
The Pillar Two Navigator – GloBE Adjustments chapter has been updated for the OECD Administrative Guidance.
The OECD Administrative Guidance included a number of new elections available to MNEs to simplify or minimise some of the adverse impacts of the GloBE Rules. We have updated our Pillar Two Elections product to include all GloBE Elections.
Article 2.9 of the OECD Administrative Guidance provides for an Equity Investment Inclusion Election. This relates, in part, to the interaction of Articles 3.2.1(c) and 4.1.3(a) of the OECD Model Rules.
As an alternative to incurring additional top-up tax when a domestic tax loss exceeds the GloBE loss, Article 2.7 of the OECD Administrative Guidance provides that an MNE can elect for the Excess Negative Tax Expense administrative procedure.
Article 2.8 of the OECD Administrative Guidance provides for the inclusion of deferred tax in the GloBE deferred tax adjustment amount for ‘Substitute Loss Carry Forwards’.
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