
Insurance Investment Entities and Pillar Two
Insurance Investment Entities are subject to special treatment under the Pillar Two GloBE Rules. Read our analysis of the key provisions.
Importantly, unlike when determining the revenue for the purposes of the revenue threshold, consolidation adjustments that eliminate intra-group transactions are excluded.
The financial accounting net income or loss is based on the accounting standard used to prepare the consolidated financial statements.
Key Takeaways of the Financial Accounting Net Income or Loss
• There is no reduction in the financial accounting income or loss figure for any minority interest in the constituent entity held by other entities (this is instead taken into account when allocating any top-up tax). For more information, see Allocation of Top-Up Tax.
• Because the financial accounting income or loss figure is based on the profit and loss account, any amounts included in the Other Comprehensive Income section of the financial accounts are generally excluded. Other Comprehensive Income generally consists of items that impact the balance sheet but that aren’t reported in the profit and loss account.
This would include things like unrealized gains or losses on derivatives or retirement benefit plans and foreign currency translation adjustments.
• Although Other Comprehensive Income is generally excluded from the financial accounting income figure, revaluation method gains or losses that are included there are included.
• Consolidated financial accounts will have been prepared based on a materiality threshold. This threshold also applies to the Pillar Two GloBE income calculation.
• If the Constituent Entities’ financial accounts are prepared using an accounting standard different from the Ultimate Parent Entity (UPE) that prepares the consolidated accounts, Article 3.1.3 of the OECD Model Rules provides that another accounting standard may be used if:
o the financial accounts of the constituent entity are maintained based on that accounting standard;
o the information contained in the financial accounts is reliable; and
o permanent differences in excess of EUR 1 million arising from the application to transactions of a particular standard that differs from the UPE’s financial standard, conform to the UPEs accounting standard.
Insurance Investment Entities are subject to special treatment under the Pillar Two GloBE Rules. Read our analysis of the key provisions.
On March 20, 2025, the Swedish Ministry of Finance issued a draft law to amend the Global Minimum Tax Act. The draft law is open for consultation until May 26, 2025. The purpose of the draft law is to implement the provisions of the June 2024 OECD Administrative Guidance into domestic law.
On March 18, 2025, the government approved a draft bill on the amendment of Liechtenstein’s Global Minimum Tax Act (‘the bill’). The bill is intended to implement domestically the OECD provisions for the exchange of information in the GloBE Information Return (GIR) under the multilateral agreement between competent authorities on the exchange of GloBE information (GIR MCAA).
On March 6, 2025 a Decree of the Italian Ministry of Finance on Notification Requirements for Global Minimum Tax purposes was published in the Official Gazette. This provides more details on the double filing relief notification under Article 51(4) of Legislative Decree December 27, 2023, no. 209 (the Global Minimum Tax Law).
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.
Jurisdictions that apply a territorial basis do not tax foreign source income. This raises some interesting issues in the application of the Pillar 2 rules.
On February 20, 2025, Gibraltar issued the Income Tax (Allowances, Deductions, and Exemptions) (Amendment) Rules 2025 to allow in-scope MNEs to just be taxed under the Global Minimum Tax Act, and not the Income Tax Act.
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.
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