In this article we look at some of the key drivers that can result in Pillar 2 ETR’s being significantly different to the headline domestic tax rate.
The requirements for a participation exemption under domestic law may not match the exemption requirements in the Pillar Two Rules. Read our analysis.
In this article we look at the interaction between deferred tax on bonus depreciation and the substance-based income exclusion on investments in tangible assets.
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.
IAS 1, IAS 10 and IAS 12 all have provisions that can impact on the required disclosures in financial statements for Pillar Two, however, the key determinant will be whether the domestic tax law to implement the Pillar Two GloBE Rules has been announced, substantively enacted, or enacted before the financial statements are issued.
Our interactive map covers the current global treatment of VAT on digital services. Fully cited with links to relevant laws.
It’s been reported that Barbados is to ask the OECD for more time to implement the Pillar Two GloBE Rules. Exactly what Barbados expects is still unclear.
Germany, France, Italy, Spain and the Netherlands issued a joint statement stating that if agreement is not reached on Pillar Two in ‘the next few weeks’ they will push forward domestic implementation of the Pillar Two GloBE rules ‘by any possible legal means’ in 2023.
Identifying the data points required to apply the Pillar 2 rules is the first step in any tax data mapping MNEs undertake. We list the key 122 data points.
Our interactive map breaks down worldwide corporate income tax rates to identify jurisdictions with a headline CIT rate below the Pillar Two 15% rate.
In most cases, a Qualifying Refundable Tax Credit will result in a higher Pillar Two effective tax rate than a non-qualifying tax credit. However, this is not always the case. We look at some examples in this article.
Our Investment Companies Top-Up Tax Calculator models the impact of Pillar Two in a jurisdiction where there are a mix of investment and non-investment companies.
The Amount A elimination of double taxation provisions in Title 5 of the Progress Report on Amount A of Pillar One apply to prevent a multinational group being taxed twice on profits allocated to a market jurisdiction where there is already some form or physical establishment that is subject to tax.
The Revenue Sourcing Rules for Amount A are used to determine where an in-scope multinational group derives its revenues. This is then used in the profit reallocation calculation.
Use our interactive tool to quickly determine the relevant sourcing rule for each revenue type.
Allocation Keys are a key aspect of the Amount A Revenue Sourcing Rules, which attribute revenue to the jurisdictions an MNE group operates in. This is then used when determining how much profit is reallocated to a jurisdiction.
The marketing and distribution profits safe harbour is included in Articles 6(3)-(6) of the Progress Report on Amount A of Pillar One. It is deducted
A key issue with a distribution tax regime such as Estonia’s is that a company may not distribute profits for a number of years. They would have GloBE income but no or limited tax suffered on that income which would lead to a sizeable Pillar Two top-up tax liability. As such a distribution tax regime election is available.
The substance-based income exclusion favours capital intensive and certain low profit margin companies. These companies stand to benefit the most.
The Chief Executive of Malaysia’s Inland Revenue Board has confirmed that Malaysia intends to push ahead with the implementation of Pillar Two.
Our Qualified Domestic Minimum Top-Up Tax (QDMTT) interactive tool allows you simulate the impact on your top-up tax liability depending on whether the domestic top-up tax is a QDMTT or is non-qualifying.
The Finance (Miscellaneous Provisions) Bill 2022 (subsequently enacted with very minor amendments in the Finance (Miscellaneous Provisions) Act 2022) which implements provisions of the 2022 Budget in
The Total Deferred Tax Adjustment Amount is a key element of the Pillar Two effective tax rate calculation. See our members flowchart which guides you though the calculation.
Differences in Accounting Standards have a significant impact on the Pillar Two effective tax rate (ETR) and top-up tax calculation. Read this detailed report.
The Pillar Two GloBE loss election can only be made once per jurisdiction. Therefore it’s essential to identity whether this will be beneficial or not. There may be some cases (such as where there is no deferred tax in a jurisdiction or where corporate income tax rates are very low) that this could swing the balance in favour of making an election. But what about the impact of other timing differences? In this article we look at the pro’s and con’s of making a GloBE loss election, including examples to illustrate key issues.
The Pillar Two rules include a number of transitional rules that apply to MNEs from December 1, 2021. In this members article we look at the adjustments and tracking impact for MNE groups.
The UK published draft legislation on July 20, 2022, to implement a ‘multinational top-up tax’ in line with Pillar Two of the OECDs Two-Pillar Solution. We have produced a calculator to illustrate the key aspects to the calculation of the multinational top-up tax.
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.
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.
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?
The Pillar Two rules don’t just apply to companies. They apply to ‘entities’ which can include Trusts and Foundations. The application of the Pillar Two rules to Trusts and Foundations can give rise to a number of issues. Read our member article on some of the practical issues to consider.
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.
When allocating taxes to group entities for the purpose of the Pillar Two rules, tax paid by a parent entity under a controlled foreign company (CFC) regime is usually allocated to the CFC entity. However, under Pillar Two, this is subject to a limitation. Use our interactive tool to see the impact of the CFC pushdown limitation.
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