Navigating BEPS 2.0: Pillar Two

In Tax

Activity around the Organisation for Economic Co-operation and Development (OECD)'s/G20's BEPS 2.0 initiative is increasing, and these changes will impact US multinationals, necessitating a re-evaluation of their data systems, structures, tax obligations, approach to risk and controversy, and more.

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Pillar Two: Be prepared for global minimum taxes

Multinational Enterprises (MNEs) need to keep a close eye on developments in relevant jurisdictions as they implement global minimum tax rules into their domestic laws. Most large organizations are only at the start of their global minimum tax journey. Organizations will need to find ways to  calculate their new taxes, evaluate the impact on their financial statements, and report to the relevant tax authorities around the world. They will also need to adapt their internal processes and systems to manage the new computations and data, to calculate their global minimum tax liabilities and satisfy reporting obligations.

Government tax policymakers around the world are collaborating on proposals for significant changes to international tax rules in light of the globalization and digitalization of the economy. The G20/OECD project on addressing the taxation of digital economy began in 2019, building on the final reports issued in 2015 in the earlier project on BEPS.

The current project, referred to as BEPS 2.0, has two elements:

  • Pillar One on new nexus and profit allocation rules with the objective of assigning a greater share of taxing rights over global business income to market countries, and
  • Pillar Two rules on new global minimum tax, approved in December 2021 by 141 jurisdictions participating in the BEPS 2.0 project.

The Pillar Two Model Rules provide for a global minimum tax of 15% applicable to multinational enterprise (MNE) groups with a global turnover of €750 million or more.

Considerations by sector

We asked 1,600 organizations how they were transforming their tax and finance functions overall and in preparation for BEPS Pillar Two. Some interesting findings are highlighted in the charts below. For more details, read our 2023 EY Tax and Finance Operations survey.

What EY can do for you

EY’s integrated global team of local and international tax, tax compliance, and tax technology professionals can help you navigate the complex rules and assess potential impacts. EY teams can also work with you to develop a robust, actionable plan to be ready when the rules are enacted and effective.

End-to-end support for a major tax challenge

Businesses affected by Pillar Two may have already started to assess the impact on their future effective tax rates (ETR), but this is just the beginning. Here is a snapshot of the four steps in the path toward managing global minimum taxes – most organizations are only at step one. 

Tracking the latest BEPS developments

The EY BEPS tracker helps you monitor latest developments in jurisdictions related to the implementation of global minimum tax rules.

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Developing a bespoke action plan for BEPS 2.0

Once a multinational organization conducts a high-level impact assessment, an actionable plan for global minimum taxes in terms of compliance and management will need to be established. But as the clock is ticking, any challenges should be diagnosed as early as possible, so that they can be resolved before implementation.

Implementing the plan

Being prepared for Pillar Two will require significant cross-functional coordination involving tax, accounting, legal, systems/IT, and business stakeholders.

The complexity around global minimum tax rules can be an overwhelming proposition for some, and a major challenge for all. By working with EY teams, your organization can manage this complexity and be compliant with applicable rules, balancing cost, service, tax controversy, and tax risk.

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