Roadmap for a Pillar Two Impact Assessment

MNEs within the scope of Pillar Two are well advised to carry out a Pillar Two Impact Assessment. We look at the key reasons for this in this article, but in essence the benefits are it allows MNE groups to:

identify potential top-up tax;
ascertain and implement changes to processes and systems;
plan for possible accounting disclosures in advance of when the Pillar Two rules are implemented
consider the impact of Pillar Two on future reorganisations and intra group asset transfers.
identify deferred tax adjustments that need to be tracked from December 2021 and ensure required data points and systems are in place to collect the data.

Whilst there is flexibility as to how an impact assessment is undertaken and the level of detail required, the general approach will be to determine the jurisdictional effective tax rate (ETR) based on the Pillar Two GloBE rules in order to initially determine the extent of any potential top-up tax liabilities. As part of this process, additional data points and potential systems/process changes will be identified.

Pillar Two Impact Assessment – Starting Point

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Lee Hadnum

Lee is a qualified Chartered Accountant and Chartered Tax Adviser. A former Senior Tax Analyst at Bloomberg Tax, Lee began his career in Ernst & Young's Entrepreneurial Services department and has 20 years of international tax planning experience. Lee's books have been recommended by The Times, The Guardian and The Telegraph.

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Roadmap for a Pillar Two Impact Assessment

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Lee Hadnum