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The role of finance in navigating the OECD global minimum tax rules

As companies prepare for OECD global minimum tax rules, finance leaders have a role in mobilizing finance beyond the given tax implications.

In brief
  • The OECD Pillar Two GloBE rules define the scope and mechanics of a 15% global minimum tax based on financial reporting amounts with certain adjustments. 
  • Multinational entities with consolidated financial statement revenues above EUR750 million will be affected by the rules effective January 1, 2024.
  • Companies should not underestimate the effort needed by their finance functions to align financial data, systems, processes and controls to the new rules.

As countries across the world enact the Global Anti-Base Erosion (GloBE) rules set out by the Organisation for Economic Co-operation and Development (OECD), companies are thinking about potential changes needed to comply with these rules. While analyzing the scope of these changes, companies are finding that they need to involve additional stakeholders to provide input on the potential scope and scale of the changes. Below is a summary of considerations to help finance professionals think about how they should get involved with their tax teams and who else within their organizations might provide valuable input.

Interaction between the GloBE rules and financial accounting

The starting point for the minimum tax computations is net income or loss for a Constituent Entity (CE) (e.g., subsidiary) as reported in financial accounts used in preparing the consolidated financial statements of the ultimate parent entity (UPE). This CE-level net income or loss needs to be prepared before any consolidation adjustments eliminating intra-group transactions and is determined based on the accounting standards used by the UPE (e.g., US GAAP for a UPE that reports under US GAAP). This stand-alone-level financial information may not be available if the company does not otherwise have a need to prepare statutory or other stand-alone financial statements for each CE.

Some challenges in collecting relevant information include determining whether any current stand-alone CE books reflect the impact of top-side adjustments, statutory-to-GAAP adjustments or intercompany eliminations and also whether CE stand-alone reporting is currently prepared using different accounting standards than the UPE.

After getting to the appropriate stand-alone CE financial statements using the accounting standards applied by the UPE, the GloBE rules then outline a variety of adjustments to net income or loss and special rules and available elections that must be applied before calculating the GloBE tax. Companies should carefully consider the criteria for these adjustments to determine whether and how to apply them.


Evaluate extent of system in capturing information

The GloBE rules represent a significant and fundamental shift in the global tax landscape, and many companies have not historically tracked the information needed to compute the GloBE tax. Determining data requirements and compiling data may likely be one of the biggest challenges companies face. To help address these data challenges, companies may want to evaluate the extent to which existing or available systems can help capture necessary information to compute, account for, report on and administer the tax.


Processes and controls implementation: diagnose data gaps

Organizations will likely need new or modified processes and controls in place to gather data, prepare the calculations and determine the appropriate reporting. Companies should diagnose data gaps as processes and controls are implemented. Additionally, tax provision workflow will likely be extended due to the additional data that needs to be captured and the additional calculations to determine the GloBE tax and financial statement effects. On a quarterly basis, companies will need to be able to provide forecasts by CE to calculate their GloBE effective tax rate (ETR). Given that forecasting at the consolidated company level is already complex, it is expected that it will be a challenge to perform at the CE level. Some organizations expect that these additional steps will add days to their financial close timelines.

Implementation timing of GloBE rules

The new rules are generally expected to be effective in 2024 (although there may be variances based on country-by-country adoptions). Therefore, companies should move quickly to ensure their ledger and reporting systems and data flows are ready for forecasting, reporting, disclosure, audit and compliance. However, there are transitional safe harbors available that allow companies to defer complete compliance under GloBE for CEs that meet certain thresholds. This allows companies to prioritize today’s efforts on those CEs that do not qualify for transitional safe harbors.


Financial statement disclosures during implementation

For Securities and Exchange Commission (SEC) filers, Item 303 of Regulation S-K requires disclosure in Management’s Discussion and Analysis (MD&A) of prospective information that is reasonably likely to have a material impact. Therefore, entities that file financial statements with the SEC should consider whether disclosure of the expected impact of the GloBE rules on their results of operations or financial condition is necessary.

For those reporting under IFRS, additional disclosures are required.


Financial statement audit considerations

Companies should stay engaged with auditors related to implementation of the GloBE rules. Auditors will focus on the accuracy of a company’s income tax accounting, related disclosures and the effectiveness of a company’s processes and internal control, among other things.


Next steps: cross-functional collaboration

Companies should consider developing a project plan that includes the broader finance function beyond tax, including controllership and treasury, as well as other areas of the organization, such as legal, IT and internal audit. Cross-functional collaboration, with input from the finance function, will be critical for a successful implementation.

More information on the GloBE rules can be found in the EY Technical Line – Preparing for a global minimum tax under the OECD’s Pillar Two Global Anti-Base Erosion model rules.


The GloBE rules have far-reaching impacts on an organization beyond the tax department, and finance leaders should be proactive in leading the implementation of these rules within their organizations. Being prepared and having a plan that considers the widespread implications of these changes will be more likely to produce a successful outcome.

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