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Grant Thornton’s culture is one of our most valuable assets and has steered us in the right direction for more than 100 years.
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Beyond global scale, we embrace what makes each market unique, local understanding on a global scale.
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In a world that wants more options for high quality services, we differentiate in the market to grow sustainably in today’s rapidly changing environment.
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Grant Thornton International Ltd acts as the coordinating entity for member firms in the network with a focus on areas such as strategy, risk, quality monitoring and brand.
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At Grant Thornton, we have a wealth of knowledge in forensic services and can support you with issues such as dispute resolution, fraud and insurance claims.
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Workable solutions to maximise your value and deliver sustainable recovery.
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We can support you throughout the transaction process – helping achieve the best possible outcome at the point of the transaction and in the longer term.
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At Grant Thornton, our IFRS advisers can help you navigate the complexity of financial reporting from IFRS 1 to IFRS 17 and IAS 1 to IAS 41.
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Our teams have in-depth knowledge of the relationship between domestic and international tax laws.
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Through our global organisation of member firms, we support both companies and individuals, providing insightful solutions to minimise the tax burden for both parties.
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Indirect international tax
Using our finely tuned local knowledge, teams from our global organisation of member firms help you understand and comply with often complex and time-consuming regulations.
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Transfer pricing
The laws surrounding transfer pricing are becoming ever more complex, as tax affairs of multinational companies are facing scrutiny from media, regulators and the public
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Africa tax desk
A differentiating solution adapted to the context of your investments in Africa.
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Banking Holding banking to account: the real diversity and inclusion pictureWe explore how the banking sector can continue to attract, retain and nurture women to build a more diverse and inclusive future.
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Sustainability From voluntary to mandatory ESG: How banks can future-proof their operationsAs we move from voluntary ESG initiatives to mandatory legislation, we explore what the banking sector needs to prioritise.
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IFRS IFRS 9 - Audit of Expected Credit LossesGPPC releases The Auditor’s response to the risks of material misstatement posed by estimates of expected credit losses under IFRS 9
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growthiQ Steering your company to long-term successHistory has something important to tell us about the difficulties of steering a business to long-term success – through seismic shifts in technology, consumer demands and product development. With that in mind it’s unsurprising that over half the world’s largest companies in the early 1900s had shut their doors by the late 1990s. Some, however, have endured.
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International Financial Reporting Standards Implementation of IFRS 17 ‘Insurance Contracts’The auditor’s response to the risks of material misstatement arising from estimates made in applying IFRS 17 ‘Insurance Contracts’
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IFRS Get ready for IFRS 17After twenty years of development the IASB has published IFRS 17 ‘Insurance Contracts’, find out more.
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Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - Sector analysis Clear patterns of damage from COVID-19 across the industriesThe index results for 12 key sectors of the mid-market reveal just how much or little the various parts of the economy were impacted by COVID-19.
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Not for profit Mission: possible – putting impact at the heart of charityGlobal charitable continues to decline and charity leaders are increasingly looking at their own unique impact journey.
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Access to finance Raise finance to invest in changePrepare your business to raise finance to invest in change.
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Private equity firms Private equity in the mid-market: reshaping strategies for 2021When the global COVID-19 pandemic stormed across the globe in early 2020, the private equity sector was hit hard but deals are coming back to the market.
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Mid-market businesses Getting ready for private equity investmentOur specialists explore how private equity firms are now working with their portfolios and how the mid-market can benefit from investment.
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Mid-market businesses Myth-busting private equityNervous about partnering with Private Equity? We explore some of the common myths we come across when speaking to mid-market businesses about PE investment.
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Public sector Helping build the government of tomorrow, todayLearn about the Grant Thornton US public sector team.
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Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - Sector analysis Clear patterns of damage from COVID-19 across the industriesThe index results for 12 key sectors of the mid-market reveal just how much or little the various parts of the economy were impacted by COVID-19.
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Industries European Real Estate PodcastJessica Patel, Tax Partner at Grant Thornton UK speaks with tax partners and directors across the network to share their insights on the real estate market and some of the challenges.
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Industries European Real Estate PodcastJessica Patel, Tax Partner at Grant Thornton UK speaks with tax partners and directors across the network to share their insights on the real estate market and some of the challenges.
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Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Retail How retail is positioning for successCOVID-19 provided some hard lessons for the retail industry. It is time to turn those into sustainable and well executed growth strategies in 2021.
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Telecoms Can tech and telecom leverage economic headwindsAs most businesses brace for an economic downturn, tech and telecom could see new prospects. But, to turn the headwinds to your advantage, you need to find your unique opportunities and risks.
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Technology Mid-market tech companies lead the way on diversity and inclusionWe explore how the mid-market tech sector can continue to build and nurture a culture that’s increasingly more diverse and inclusive for women.
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Tax Resetting global tax rules after the pandemicBusinesses are seeing rising challenges, and finance heads are dealing with a range of new measures. To say the next 12 months are critical for businesses is an understatement.
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TECHNOLOGY International tax reform: the potential impact on the technology industryIn this article, we’ve summarised key elements of the global tax reform proposals, their potential impact on technology industry and advice from our digital tax specialists on what technology companies can do to prepare.
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Telecoms Can tech and telecom leverage economic headwindsAs most businesses brace for an economic downturn, tech and telecom could see new prospects. But, to turn the headwinds to your advantage, you need to find your unique opportunities and risks.
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TMT TMT industry: Fully charged or on standby?Our research revealed five key trends that resonated with Technology, Media and Telecoms (TMT) industry leaders around the world. We asked a panel of our experts from UK, US, India Ireland and Germany, to give us their reaction to the findings.
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Cybersecurity One size fits nothingTechnology companies must adopt a new approach to digital risk: those that successfully develop a reputation for digital trust by demonstrating an unwavering commitment to cyber security and data privacy will be able to carve out a competitive advantage.
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Technology, media & telecommunications Why it’s time for a 5G reality checkFigures suggest the mobile sector is maturing. While data usage continues to soar, mobile revenues are expected to flatten out over the next few years.
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International business Mid-market businesses lifted by rising tide of optimismOptimism among global mid-market business leaders rose to 67% in the first half of this year and they are markedly more optimistic about their prospects with global optimism having increased by 8%.
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Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Hotels COVID-19: Checking in with the hotel industry one year onCOVID-19 provided some hard lessons for the hotel sector. It is time to turn those into sustainable and well executed growth strategies.
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- By topic
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Women in Business 2024
2024 marks the 20th year of monitoring and measuring the proportion of women occupying senior management roles around the world.
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COP28: Mid-market firms should seize the opportunity from adaption and innovation
COP28 was the first time there has been a global stocktake on progress against the Paris Agreement.
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Scanning the horizon: Mid-market sets sights on global trade growth
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Mid-market businesses less optimistic, despite record numbers expecting increased profitability
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Women in tech: A pathway to gender balance in top tech roles
Grant Thornton’s 2024 Women in Business data suggests we are far from achieving parity within the mid-market technology sector.
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Women in leadership: a pathway to better performance
What makes the benefits of gender parity compelling is the impact it can have on commercial performance.
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Women in Business 2024
2024 marks the 20th year of monitoring and measuring the proportion of women occupying senior management roles around the world.
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Women in business: Regional picture
We saw an increase in the percentage of senior management roles held by women, on a global level, but there are some significant regional and country variations.
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Pathways to Parity: Leading the way
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The most successful strategy to achieve parity of women in senior management is one which stands alone, independent of an ESG strategy.
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Transition Plan Taskforce publishes its final disclosure framework
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Promoting ESG excellence through tax
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International business: Mid-market growth and expansion
The mid-market looks to international business opportunities for growth.
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Top five constraints to international business in the mid-market
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Evolving supply chains and trade patterns amid ongoing global uncertainty.
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IFRS Alerts
IFRS Alerts covering the latest changes published by the International Accounting Standards Board (IASB).
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Example Financial Statements
General guidance for preparers of financial statements that supports the commitment to high quality, consistent application of IFRS.
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Insights into IFRS 2
Insights into IFRS 2 summarises the key areas of the Standard, highlighting aspects that are more difficult to interpret and revisiting the most relevant features that could impact your business.
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IFRS 3
Mergers and acquisitions are becoming more common as entities aim to achieve their growth objectives. IFRS 3 ‘Business Combinations’ contains the requirements for these transactions.
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IFRS 8
Our ‘Insights into IFRS 8’ series considers some key implementation issues and includes interpretational guidance in certain problematic areas.
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IFRS 16
Are you ready for IFRS 16? This series of insights will help you prepare.
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IAS 36
Insights into IAS 36 provides assistance for preparers of financial statements and help where confusion has been seen in practice.
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IFRS 17
Explaining the key features of the Standard and providing insights into its application and impact.
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Pillar 2
Key updates and support for the global implementation of Pillar 2.
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Global expatriate tax guide
Growing businesses that send their greatest assets – their people – overseas to work can face certain tax burdens, our global guide highlights the common tax rates and issues.
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International indirect tax guide
Navigating the global VAT, GST and sales tax landscape.
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Global transfer pricing guide
Helping you easily find everything you need to know about the rules and regulations regarding transfer pricing and Country by Country reporting for every country you do business with.
Background
The OECD has been working on its Base Erosion and Profit Shifting (BEPS) project now for nearly a decade. Progress relating to the two-pillar approach (BEPS 2.0) to address the challenges in the modern international tax landscape has been accelerating in recent years.
As part of BEPS 2.0, the OECD has focused on ensuring multinational businesses pay their tax in the 'right place' (Pillar 1) and at least at a 'minimum rate' (Pillar 2).
Over 130 countries have signed up to implement the Pillar 2 rules and the OECD’s Model Rules and commentary were released in December 2021 and March 2022 respectively. These rules will seek to ensure multinational enterprises (MNEs) are paying tax at an effective rate of 15% or higher in every jurisdiction they operate, regardless of the local headline tax rate or the impact of local tax reliefs. These rules will apply to multinational businesses with consolidated global revenue in excess of EUR 750 million.
Where the effective rate of tax is below 15% in any jurisdiction (and subject to a number of exceptions) the tax must be 'topped up' by the group, usually in the jurisdiction of the ultimate parent entity.
What’s new?
On 20 December 2022, a year after the release of the Pillar 2 Model Rules, the OECD released its long-anticipated implementation package for Pillar 2, which includes three key documents covering:
- Guidance on safe harbours and penalty relief;
- Public consultation document on the Global Anti-Base Erosion (GloBE) information return; and
- Public consultation document on tax certainty for the GloBE Rules.
In this article, we provide a summary of the key highlights in these new documents and make some practical suggestions on the actions businesses could take to prepare.
For more detail on the Pillar 1 and Pillar 2 rules, what they mean for your business and the importance of early preparation, please visit our international tax website hub.
Safe harbours and penalty relief
The OECD held a public consultation in April 2022 on the Implementation Framework and received significant input from stakeholders outlining concerns over the compliance burden that Pillar 2 could give to multinational enterprises (MNEs) even where no tax was at stake. As such, a serious need for simplification was identified.
The guidance on safe harbours and penalty relief confirmed:
- The introduction of a transitional CbCR Safe Harbour
- A framework for the development of permanent safe harbours
- Transitional penalty relief where an MNE has taken 'reasonable measures' in applying the GloBE rules; and
- A commitment that the Inclusive Framework will continue to explore possibilities for future simplifications and safe-harbours.
We will discuss each of these areas below.
Transitional CbCR safe harbour
The ‘Transitional CbCR Safe Harbour’ has been designed as a short-term measure during the specified transition period (fiscal years beginning on or before 31 December 2026 and ending on / before 30 June 2028). This seeks to minimise the compliance burden for so called ‘low-risk’ jurisdictions by excluding them from the main Pillar 2 calculation. In order to meet the requirements of the safe harbour for a particular jurisdiction, at least one of the following tests must be met:
- The MNE must not have revenue of more than €10million and a profit (loss) before tax of more than €1million in said territory (de minimis test); or
- The MNE must have a (simplified) effective tax rate in said territory of equal or more than 15%, 16%, 17% in the fiscal years beginning in 2023 (and 2024), 2025, 2026 respectively (simplified ETR test); or
- The MNE must have profit (loss) before tax in said territory equal to, or less than the Substance-Based Income Exclusion as calculated under the Pillar 2 rules (routine profits test).
The data used to determine whether the requirements above are met can be taken straight from financial statements and country-by-country reports (with only a small number of adjustments required). It is intended that using such readily available and easily verifiable data should provide clarity to businesses and simplify any calculations in the early years of adoption where an MNE meets one (or more) of the tests.
There are various complexities arising from the Pillar 2 rules that MNEs may need to apply to their specific business. These too will need to be taken into consideration when applying the transitional CbCR safe harbour provisions, so the devil will still be in the detail.
A framework for permanent safe harbours
The transitional CbCR safe harbour will not apply beyond the transition period. Thereafter a permanent set of safe harbours will apply to simplify the Pillar 2 rules.
It is not possible to say with certainty at this time, exactly how the permanent safe harbours will evolve. Nevertheless, the OECD has confirmed that in order for a safe harbour to be appropriate it must:
- Give the same outcome if a full Pillar 2 calculation were to be undertaken,
- Not otherwise undermine the integrity of the Pillar 2 rules,
- Provide a degree of tax certainty such that the safe harbour can be relied upon on a consistent basis.
The Implementation Framework provided some high level indications of the form these safe harbours will take. Nevertheless, further work is undoubtedly required in order to develop these for the longer term:
- The permanent safe harbours will be similar in nature to the tests contained in the transitional safe harbours, albeit the calculations required to satisfy the tests are likely to be more detailed i.e. data taken directly from financial statements and country-by-country reports will not suffice. The safe-harbour tests will use simplified income, revenue and tax calculations which are alternative calculations to the GloBE income or loss, GloBE revenue and adjusted covered taxes calculation required for the 'full' Pillar 2 rules. Whilst the consultation document provides a framework for the development of these simplified calculations, the inclusive framework is still considering the detail of the calculations which will be released in future agreed administrative guidance.
- The inclusive framework has also committed to considering as part of the administrative guidance on the Qualifying Domestic Minimum Top-Up Tax (QDMTT), a safe harbour based on a jurisdiction having implemented a QDMTT (eliminating the need to perform an additional GloBE calculation in addition to the QDMTT calculation required under local law).
It should be noted if an MNE qualifies for a safe harbour in a particular jurisdiction this would not exempt the MNE group from complying with group-wide Pillar 2 requirements
Transitional penalty relief
To provide a soft-landing during the transition period it is proposed that no penalties or sanctions apply where an MNE has taken 'reasonable measures'. The term 'reasonable measures' is not defined in the document and it will be for tax administrations to assess based on the facts and circumstances in each case – though reference is made that Tax Authorities could consider an MNE has taken such measures where it is able to 'demonstrate that it has acted in good faith to understand and comply with the relevant domestic application of the GloBE Rules and the QDMTT'.
Public consultation document on tax certainty for the GLoBE Rules
The inclusive framework jurisdictions have agreed to implement the Pillar 2 rules using the 'common approach'. This ensures that the rules are implemented consistently across the relevant territories to minimise discrepancies. Nevertheless, given that the main elements of the Pillar 2 rules must be enacted through domestic legislation in each jurisdiction separately, there remains a risk that interpretations could vary, leading to divergent outcomes.
In order to minimise such risks, the Implementation Framework has identified a number of mechanisms which are currently being explored by the inclusive framework as options to provide tax certainty. These are broadly split into two distinct mechanisms:
- Dispute prevention mechanisms (to apply in advance of any action by tax authorities)
- Dispute resolution mechanisms (to apply once action has been taken).
The OECD has requested input from stakeholders as to the design of the potential mechanisms for dispute prevention and resolution, the request for stakeholder comments will close on 3 February 2023.
Public consultation document on the GloBE Information Return
As part of the Pillar 2 rules, MNEs will be required to file a GloBE Information Return (GIR), usually, but not always, in the jurisdiction of the ultimate parent entity. The submission deadline for the GIR will be 15 months after the end of the accounting period (extended to 18 months for the year where an MNE transitions into the Pillar 2 rules).
As part of the Implementation Framework the OECD has released details of the data points which it intends to form the basis of the GIR. Broadly these are split into four sections:
- General information relating to the MNE Group such as the group name, fiscal year, name of the financial accounting standard used in consolidated financial statements etc;
- Corporate structure covering the ownership structure of all group entities, any changes in the period and how each may need to apply certain elements of the Pillar 2 rules e.g. IIR and / or UTPR.
- Effective Tax Rate and Top-up Tax calculation. This includes details of Pillar 2 adjustments pertaining to the calculation of GloBE income / loss and Adjusted Covered Taxes as well as details of any elections utilized and safe harbours applied.
- Top-up Tax allocation and attribution covering how any Top-Up Tax should be attributed across the MNE Group and calculations thereof.
The exact number of data points required will be dependent on the specific facts of the MNE Group and will be subject to change; the OECD is now inviting stakeholder comments on the specific data points highlighted in the public consultation document and where these could be simplified or rationalized (the consultation is open until 3 February 2023). However, the GIR will undoubtedly place a large burden on MNEs for compliance purposes.
What should businesses consider now to prepare for Pillar 2?
It is important that businesses within the scope of Pillar 2 are ready ahead of the rules coming in. Some key questions to address include the following:
- Are the territories in which our business operates implementing the Pillar 2 rules and if so, when?
- What elements of the Pillar 2 rules are being implemented in the jurisdiction in which our business operates (Income Inclusion Rule, Undertaxed Profits Rule, Domestic Minimum Tax) and how do they interact?
- What data might we need to collect to undertake a Pillar 2 calculation and ultimately fie a GloBE information return? At present does that data exist? How can systems and processes be streamlined to collect data in a way to minimise our compliance burden?
- What might our tax exposure be under Pillar 2?
- What might our reporting obligations look like under Pillar 2?
If you require any assistance answering any of these questions, please contact your local Grant Thornton member firm who can put you in touch with a Pillar 2 specialist.
Those with the confidence, agility and knowhow to build operational and business model changes, required by Pillar 2 and other international tax changes, into their wider business strategy will increase resilience and minimise disruption when the changes happen.
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