Pillar 2 and system support

With the Pillar 2 rules, the complexity of global tax compliance will increase immensely for multinational groups. The rules include understanding regulations in many jurisdictions, data collection, performing and processing calculations, understanding accounting treatments, adjusting for changes in prior periods, and keeping track of reorganizations. A specific filing of Pillar 2 calculation returns and notifications is introduced.

System support will be essential to ensure compliance. Data likely needs to be retrieved from different sources to calculate and file Pillar2 returns.

We see five main areas where a multinational group needs to spend time on system support.

• The Pillar 2 regulations imply that the group must have control of data concerning entities and PE’s and changes in ownership (entity management data).
• A data collection process for gathering financial figures (+100 data points) and other relevant data needed for Pillar 2 calculation and reporting purposes.
• An updated solution for doing calculations and analysis of the tax effect that serve the need for Pillar 2 compliance reporting.
• The filing and conversion of data into the correct filing format will require a data conversion tool.
• Secure that the correct entity pays top-up tax in the proper jurisdictions.

The Blika Pillar 2 solution

• With the Blika Pillar 2 solution, you get a comprehensive, integrated solution that manages your compliance process. Among others, the solution handles the following.
• With a well-established entity management system, keeping track of entity information and ownership data is easy in the Pillar 2 process. The entity management data is structured to be used automatically in the different calculations, and the filing that Pillar 2 requires
• You can manage the classification and entity selection process to decide what entities are in scope for Pillar 2 calculation and reporting.
• The solution handles the prior year adjustment process, keeping track of the recapture rules and the Eligible dividend distribution adjustments with the possibility to make recalculations of previous years to decide any additional top-up tax.
• Safe Harbour entity classification

• Manage and track Pillar 2 elections on a group, jurisdictional, and entity level.
• Central data collection on a jurisdictional and entity level with integrations with financial systems through API’ or excel template retrievals and with manual input. Data may be retrieved from the group accounts, but data on an entity level is often not easily retrieved in many groups. The data collection challenge and the definition of taxes and income imply that groups should investigate where to find the needed data and its quality. After that, a decision can be made to align with the rules. The Blika Pillar 2 solution is flexible and solves your data collection challenges.
• Local data collection – reaching out to reporters for data input or sign-off when data is not readily accessible centrally.
• Automatic calculation of Pillar 2 and Qualified Domestic top-up tax and allocation of the top-up tax to the correct
• Analysis and decision process.
• A reporting tool that manages reports in different formats, including potential pillar 2 XML filing format.

Blika has an integrated solution that can manage the data collection needed for Pillar 2. At the same time, we have vast experience in international tax law and how to facilitate required processes in a multinational group with the help of system support. We are at the moment in discussion with all our customers to evaluate a best practice solution concerning the Pillar 2 regulations. If you want to keep yourself updated regarding how your peers in the market consider approaching this complex area, please reach out to us for a discussion.

1

The challenge

If you are responsible for taxes in a multinational group, you will most certainly have thought about how a tax technology solution could support your tax function.

2

Take control

The basis is to support automation of data gathering in your organization in secure and efficient workflows and with full control of what every reporting person should perform on a timely basis.

3

Stay in control

You must be able to analyze the information in tables, reports and in an efficient analysis tool, regarding both current and historical data. Flexibility is key since a solution must handle processes that are centralized or decentralized.