Pillar Two Checklist

Is your tax team on top of possible global minimum tax requirements?

Pillar Two of the Organisation for Economic Co-operation and Development’s (OECD) two-pillar approach to modernizing the global tax system may result in the need to address global minimum tax requirements as early as 2023.

The potential impact of Pillar Two rules is significant:

  • Thousands of multinational groups with global revenue of EUR 750 million or more would be subject to a global minimum tax of 15 percent in the jurisdictions in which they operate.
  • These groups would face significant compliance requirements to demonstrate jurisdictional effective tax rates—calculated under complicated rules with multiple data sources needed—are at 15 percent or above.
  • Parent companies headquartered in OECD Inclusive Framework (IF) countries would be obligated to calculate and pay a top-up tax for offshore jurisdictions where their effective tax rate is below 15 percent. Companies headquartered outside IF countries may also face compliance requirement if they are operating in IF countries.
  • Company effective tax rates may garner media attention.

There are actions company tax teams can be taking now to prepare. Review our Pillar Two Checklist to get started or to help determine where gaps may exist in tax department efforts to be prepared for the possible Pillar Two changes.

 August 2022

Pillar Two Checklist

1
 
Monitor country reactions and participate in local policy/guidance and development

2

Determine which entities in the group structure are in-scope of the rules

3

Perform impact assessment to determine whether a top-up tax obligation will arise and what elections to make

4

Manage internal and external stakeholders, including market disclosure obligations

5

Assess resource needs to determine the impact and ongoing compliance needs and set up a project team

6

Assess new complex data needs and systems changes needed for reporting

7

Review governance controls to help manage the risks associated with complex rules

8

Determine if material financial statement impatcs and disclosures are needed

9

Review restructuring, value chain, IP location, and financing
 

Global Tax Reform: BEPS and Tax Transparency

Stay abreast of ongoing developments regarding the OECD's base erosion and profit shifting (BEPS) project plan, including lastest OECD efforts that focus on a two-pillar approach to modernizing the global tax system, including a global minimum tax under Pillar Two.

How KPMG can help

Contact your local KPMG Tax adviser to learn more about how KPMG can help your organization prepare for the implementation of a global minimum tax under Pillar Two. KPMG can help with:

  • Modeling support – Quickly assess the likely impact of Pillar Two and the degree of focus you need to respond effectively to the challenges BEPS may bring, using the KPMG BEPS 2.0 Model
  • Impact assessments and ongoing compliance – Understand Pillar Two impacts and the appropriate responses, including structuring considerations and possible systems changes
  • Accounting support – Calculate jurisdictional effective tax rates and address accounting implications of top-up taxes
  • Legal entity simplification – Consider restructuring to potentially simplify reporting, provide cost savings, and reduce tax risk for the corporate group, if the group structure and value chain are no longer appropriate
  • Stakeholder communications – Outline expected Pillar Two impacts for C-suite and audit committee education and engagement
  • Related tax impacts – Address related transfer pricing, DST tax, IP location, and R&D considerations