Pilíř 2 iniciativy BEPS 2.0. – máte potřebná data?

Pillar 2 of the BEPS 2.0 initiative - do you have the right data?

In the last two articles I have gone through the ideas why it is necessary to start looking at the potential impact of Pillar 2 now (HERE and HERE). Simply put - the rules are complex, they are given in principle, implementation will be extremely fast, the potential impact may be material.

Let's take a look at what data and information multinational enterprise groups will need to calculate the impact of Pillar 2 in each relevant jurisdiction and prepare appropriate submissions to the tax authorities. Let's ignore for a moment the safe harbour rules (which we have informed you about in our February 2023 Tax and Legal News), which may temporarily simplify the practical application of Pillar 2.

Not entirely surprisingly, accounting data will need to be identified and assessed - in most cases accounting data under International Accounting Standards. In particular, income, expenses, tax payable and deferred tax, revaluations recognised in equity, intercompany transactions. In the detail that is common for tax returns, i.e. in great detail, in principle itemised. IFRS reporting packages sent on 3 January of the following year will certainly not be sufficient to determine the adjusted profit for the calculation of the effective tax rate. Detail will be needed for each company separately. This can be a hard nut to crack, which will require adjustments to IT systems, processes and methodologies.

Another not entirely surprising group of data will be tax data - income tax paid on the basis of the regular return and any differences on the basis of corrective returns, detail on the controlled foreign companies regime applied, companies where tax transparency is applied (and what the result is), tax regime for intra-group transactions, detail on permanent establishments, etc. The amount and detail of data can surprise even an experienced group tax manager.

To make matters worse and to involve multiple departments in each company, it will be necessary, for example, to find out the number of employees, the costs incurred (including social security costs), to check the level of ownership and control in joint ventures and in companies where the group is not 100%, the legal status of immovable property.

Due to the specific regime of the start-up rules, some items that multinational group companies will report in their 2023 financial statements may affect the calculation of the effective tax rate under the Pillar 2 rules in subsequent years. Specifically, deferred taxes can hide pleasant and unpleasant surprises.

Some insight into the vast amount of data that will need to be identified, processed and reported is provided by the OECD's draft paper on standardised GloBE information returns.

There is no one-size-fits-all way to start identifying the potential impact in future years - somewhere you just need to go through the data from the CbCR report, somewhere you just need to look at "special material items", somewhere you just need to focus on the largest jurisdictions, somewhere you need to focus on "usual suspect countries" (countries with low nominal tax rates), somewhere you need to pick a sample of companies. It depends on a lot of parameters, from the size, type and diversity of the group's business, to the countries concerned, to the IFRS accounting treatment.

Again, you can already look forward to the sequel. If you have any questions, please contact the author of this article or the EY tax team you regularly work with.

Author:

Karel Hronek