Pillar Two Checklist (2024)

FAQs

How to prepare for pillar two? ›

Under the recapture rule, if the DTL has not been paid within the five subsequent fiscal years, Company A would be required to recompute its year 1 GloBE ETR. Because the GloBE ETR for year 1 was 15 percent, the recapture of the DTL would result in a recomputed year 1 GloBE ETR of less than 15 percent.

Pillar Two: Global Minimum Taxation

These Model Rules set forth the “common approach” for a Global Minimum Tax at 15 percent for multinational enterprises with a turnover of more than EUR750 million.

The Pillar 2 requirement is a bank-specific capital requirement which supplements the minimum capital requirement (known as the Pillar 1 requirement) in cases where the latter underestimates or does not cover certain risks.

The Organization for Economic Cooperation and Development's Base Erosion and Profit Shifting Pillar 2 framework for a global minimum tax will become law in many countries effective in 2024.

Specifically, Pillar Two would establish a minimum effective tax at a proposed rate of 15 percent applied to cross-border profits of large multinational corporations that have a “significant economic footprint” across the world.

De Minimis Exclusion (Article 5.5) • For jurisdictions where the MNE has (i) an Average GloBE Revenue that is less than €10m and (ii) an Average GloBE Income or Loss that is either a loss or less than €1m, computed on a three-year average basis.

Key triggering events for depreciation recapture include the sale of a depreciable asset, business asset disposition, and conversion of property. The applicable recapture rates, determined by factors like the type of asset and the depreciation method used, can significantly impact tax liabilities.

How many data points for pillar 2? ›

Pillar Two: 122 Data Points for Systems Implementation.

What are the Pillar Two Rules? The OECD's Pillar Two framework aims to ensure MNEs with global revenues above €750 million pay a minimum effective tax rate on income within each jurisdiction in which they operate.

Your TMT Pillar Two preparation checklist

Model the impact to your financial statements and earnings per share: Calculate the impact of the new rules, consider the transfer pricing implications, and consider tech-enabled solutions and services to help speed your efforts.

The Pillar 2 supervisory review process is an integral part of the Basel Framework. It is intended to ensure that banks not only have adequate capital to support all the risks in their business but also develop and use better risk management techniques in monitoring and managing these risks.

Pillar Two compliance is a top priority

They will need accurate, timely tax-related data that is integrated across their organization, whether to comply with Pillar Two, calculate their global tax liability, or assess indirect taxes owed in jurisdictions.

Routine profits test: the profit (loss) before income tax is equal or less than the substance-based income exclusion amount as calculated under the GloBE rules.

Pillar 2 arose out of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) project and aims to end the 'race to the bottom' on tax rates by ensuring that multinationals pay a minimum effective corporate tax rate (of 15% regardless of the local tax rate or tax base).