Pillar Two (Global Minimum Tax)
Pillar Two Solution with Taxvibes
What is Pillar Two (Global Minimum Tax)?
Being part of a large multinational, you are used to dealing with the challenges that new regulations bring along. These challenges increasingly require sound business processes and a next-level data organization. Those elements are exactly what is expected from the tax function with the introduction of Pillar Two, the key components of which are commonly referred to as the "Global Minimum Tax" or "GloBE", on 1 January 2024 (if your company exceeds EUR 750 million in annual global revenue). The global minimum tax attempts to limit tax competition by introducing a globally uniform floor, below which the effect of low tax rates or fiscal policy measures would be largely obviated.
As part of OECD’s BEPS 2.0 framework, more than 130 countries (will) implement a minimum corporate tax rate of 15%. For profits in those jurisdictions that do not meet that 15% rate, the parent entity’s jurisdiction will impose an additional top-up tax. Jurisdictions are currently slowly introducing domestic rules to make sure that they can impose their domestic income tax to meet this 15% and to prevent another jurisdiction from levying ‘their’ budgeted tax income.
There is a large number of data points required to do the calculations. Around 200 data points will have to be extracted from within all sorts of sources in your organization (HR, ERP, entity management, forecasts etc). Tax offices will require you to produce Pillar Two tax returns from 2026 onwards, and for you to demonstrate that you have a proper process in place to calculate the Pillar Two rules.
The Impact of Pillar Two and How to Manage
Historical Context
Pillar Two is much more than a tax calculation exercise. You need to determine what data points are available in what source and if this is reliable data. You need to capture this data directly at the source or through communication with other departments. Therefore, it is in essence also a resource challenge.
Let’s start by focusing on three key aspects:
- Data points – you need to know which ones are relevant for you, how many there are available in your current sources, and which ones you can (start to) automate.
- Collaborate – Key to any transformation process. Include all relevant Finance, Tax, HR and IT colleagues. Move towards an even closer collaboration between tax and finance teams.
- Change your processes – Review and adjust your tax processes, determine who is responsible and accountable, and look at the impact on your financial closing, consolidation, and reporting.
Our Solution
Technology is your friend. Solutions such as OneStream are designed to handle increasing volumes of data and use that to improve visibility in tax and financial reporting.
With our Pillar Two solution for OneStream, we combine OneStream’s power of sourcing and aggregation with that of process management. Automate your Pillar Two process by using our best-practice approach and preparing for your reporting and tax return requirements, but also to give insights on impact and status in all your jurisdictions.
We have a proven track record with our tax solutions. Their functionalities accommodate your end-to-end data-driven processes and meet all your tax and tax-related financial reporting requirements within collaboration with your colleagues. They can leverage on OneStream and can facilitate your processes to increase your level of automation. Also, by including data points from other software solution sources.
What is Included in Our Solution?
We offer a suite of direct tax-related solutions in OneStream, covering tax provisioning, Country-by-Country Reporting, and Pillar Two to accommodate an end-to-end process in an efficient manner.
For Pillar Two this includes:
- GLoBE Income/Loss calculation
- Adjusted Covered Taxes Calculation
- (Simplified) Effective Tax Rate Model
- Reporting Outputs
About Taxvibes
In our DNA is that we focus on quality, but also on a pragmatic approach. Each project is executed within the most efficient manner without shortcutting on quality. This means that we combine tax reporting (Taxvibes) and software solution knowledge (AIQOS) within a project approach. With the relevant specialists, we form a team together with you.
Clients appreciate that we position ourselves next to them. We have a bias for action, meaning that we prefer to spend our curiosity and time on getting things done. Quality and theory are important, but taking this towards practical appliance will help you most.
This is also reflected in both Taxvibes’ team. Taxvibes has around 25 consultants to ensure that you receive tailored solutions that align with your organization’s goals. This joint approach gives a combination of scarce in-depth tax expertise and proven OneStream knowledge. Both are essential for tax accounting and reporting topics. This partnership has already delivered several projects worldwide and ready-to-use tax solutions in OneStream. Website
