The OECD’s BEPS 2.0 puts in place key terms for an agreement on a two-pillar approach to reforms, with Pillar Two introducing a series of new interlocking rules, including a new global minimum tax regime which has the effect of requiring a floor for tax competition amongst jurisdictions.
Pillar two, (also referred to as the “Anti Global Base Erosion” or “GloBE” Rules) will increase the complexity in global tax compliance immensely, and it’s time for multinational groups to start preparing to ensure compliance.
System support will be essential to ensure compliance with the EU regulations regarding Pillar II. Data likely needs to be retrieved from different sources to make the calculations and file special returns. Much like in public CbC reporting or the DAC6 regulations, data collection and legal entity management is integral in addressing the tax challenges arising from the digitalization of the economy regarding nexus and profit allocation challenges (“Pillar One”) and global minimum tax rules (“Pillar Two”).
We see four main areas where a multinational group needs to spend time on system support.
- The new rules imply that the group must have control of data concerning entities and PE’s and changes in ownership (entity management data).
- In determining the size of taxes paid, the relevant income, substance-based investment data, treatment of certain local country credits, and other relevant data require data collection on a jurisdictional and entity level.
- Data needed for filing and conversion of data into the correct filing format will require a data conversion tool.
- In securing that the correct entity pays top-up tax in the proper jurisdictions.
Do you need guidance in how the Pillar Two regulations might affect you?
Blika has an integrated solution that can manage the data collection needed for Pillar 2. 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 currently in discussion with all our customers to evaluate a best practice solution concerning the Pillar Two 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.
Read more about Pillar Two Requirements at blika.com/pillar-ii