Pillar Two

Pillar Two (GloBE) module in TPGenie

TPGenie has already offered solutions under the umbrella of BEPS – automated Transfer Pricing documentation tool as well as Country-by-Country Reporting Software. In its ambition to further expand the modules along with the development of the international regulations, Pillar Two (GloBE) model has been added to the scope of its offering.

Pillar Two (GloBE) module is a user-friendly tool that will consist of the following parts:

• Pillar Two Transitional Safe Harbour Calculation Sheet (planned go live: January 2024) – a calculator of the three transitional safe harbour tests per jurisdiction. Based on the outcome of the exercise, it would be possible to conclude e.g. what is the risk exposure of MNE with regard to Pillar Two rules or for which countries the full GloBE calculations might need to be further prepared; The sheet will be exportable in Excel so it would be easier to share the outcome of the investigation with the interested parties (e.g. external auditors) in order to prove control over Pillar Two risks;
• Pillar Two Regulations Library (planned go live: January 2024) – the search engine with access to relevant OECD guidelines and commentaries allowing the user to easily search for definitions and relevant provisions while preparing the calculations;
• Pillar Two Jurisdictional Tracker (planned go live: February 2024) – the summary of the status of implementation of Pillar Two (GloBE) regulations per relevant jurisdiction; The information in the tracker will, for instance, allow for an understanding on which organizational level (country), the potential top up tax will be ultimately collected and due;
• Pillar Two Knowledge Explorer (planned go live: February 2024) – search engine for relevant published articles on this subject. With the use of Artificial Intelligence (AI) you can search on keywords within Pillar Two documentation & articles;
• Pillar Two GloBE Calculation Sheets (planned go live: Q2 2024) – an effective tax rate test using a common tax base and a common definition of covered taxes to determine whether an MNE is subject to an effective tax rate below the agreed minimum rate of 15% in any jurisdiction where it operates;
• Pillar Two GloBE Management Dashboard (planned go live: Q2 2024) – an overview of the outcomes of GloBE calculations per jurisdiction that will allow for a further risk assessment;

It is also envisaged that the Pillar Two (GloBE) module will be continuously developed along with the development of Pillar Two regulations and interpretation. As an example, additional modules like the GloBE Information Return (GIR) template or the Qualified Domestic Minimum Top-up Tax (QDMTT) calculations per jurisdiction are already being considered.

As such, Pillar Two (GloBE) module in TPGenie will not constitute tax advice on the interpretation of the BEPS rules but will provide the tools for the assessment of the risk exposure of MNEs that are in scope of the regulations as well as enable control and mitigation of this risk.

If you are interested in getting to know more about the Pillar Two module, please feel free to reach out to one of the members of our team. We look forward to discussing with you Pillar Two topics relevant for your organizations!

MNEs in scope

The GloBE Model Rules will apply to MNEs that have consolidated revenues of EUR 750 million in at least two out of the last four years. This revenue threshold is broadly similar to that used for Country-by-Country Reporting (CbCR purposes) and is estimated to cover over 90% of the global corporate income tax base.

Government entities, international organizations, non-profit organizations, pension funds or investment funds that are ultimate parent entities of an MNE Group (and certain holding vehicles of such entities) are excluded entities that are not subject to the GloBE rules, but this exclusion does not affect the MNE Group owned by such entities, which will remain in scope of the GloBE rules if the group as a whole otherwise meets the consolidated revenue threshold.

Why Start Now with Pillar Two Implementation?

The European Union (EU) and a number of other jurisdictions intend to introduce Pillar Two from 2024, while other countries and territories have indicated they will introduce Pillar Two from 2025. Being aware of Pillar Two impact in your organization is essential for risk control and ensuring compliance with the global minimum tax requirements.

Pillar Two risk assessment – enabled by the Pillar Two (GloBE) module – will help tax managers to proactively identify, assess and understand the exposure as well as plan for the appropriate responses to mitigate the impact of all risks as of the very first moment the regulations are introduced.

Most importantly, a risk control framework around Pillar Two (GloBE) will help document and present – to both external and internal stakeholders – the foreseen action plan and the alignment of the tax approach with organization’s overall business strategy, which is to avoid unnecessary tax costs, whilst ensuring sound compliance with legislative requirements.

Second of all, it should be noted that Pillar Two regulations will bring a lot of complexity and additional compliance requirements for MNEs in scope. For this reason only, it is worth starting the preparations already now in order to assess not only where the main risks are generated, but also where the data points gap is as well as in order to set up right compliance processes across your organizations in advance, including training and informing relevant employees.

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