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.
Calculate estimated GloBE top-up tax. Add unlimited companies and jurisdictions via an easy to use control panel to view potential jurisdictional liabilities.
Foreign tax credits interact with the Pillar Two GloBE Rules in a number of ways. In this article we assess the key impact.
Our Modelling Tool takes the underlying source data from the OECD aggregated CbC source data and subjects it to a data manipulation process to provide a drill down into some of the key metrics and data sources that are relevant for Pillar Two on a jurisdictional basis.
Use our members Income Inclusion Rule Calculator to see how the IIR applies. Enter details of the low-taxed entity including jurisdictional GloBE income and other relevant information to determine top-up tax payable by the parent company.
Following the approval of the EU Global Minimum Tax Directive, Taiwan’s Ministry of Finance has stated it will prepare draft legislation for the government to increase Taiwan’s domestic minimum tax rate from 12% to 15%.
However, this creates a number of issues in terms of its interaction with the Pillar Two global minimum tax.
Liechtenstein has announced it is to issue a consultation on a Pillar Two Global Minimum Tax in March 2023.
The GloBE rules include a number of insurance specific adjustments. In this article we look at the nature of these provisions as well as the impact of the GloBE rules on insurance companies generally.
In this article we take a comprehensive look at how the substance-based income exclusion applies including the various adjustments for permanent establishments and flow-through entities and the data points required.
Our Global Digital Services Tax Tracker has been updated to January 23, 2023.
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