In a major step forward on 8 October 2021, over 135 Inclusive Framework members, representing more than 95% of global GDP, joined a two-pillar solution to reform international tax rules and ensure that multinational enterprises pay a fair share of tax, wherever they operate and generate profits in today’s digitalized and globalized world economy.
On December 12, 2022, the EU Council announced that EU Member States had agreed to implement the minimum tax component (Pillar Two) of OECD’s global international tax reform initiative. This is a significant development as the EU is considered a first mover. Other countries are likely to follow, including the UK, the UAE, Singapore, Hong Kong, Switzerland, etc. The Pillar Two directive must have been transposed into the EU Member States’ national law by December 31, 2023.
Tax professionals are used to new regulations, so what is different now? Pillar 2 introduces the first harmonization of direct taxes globally, brings a wide and complex set of new rules, and takes financials from consolidated reporting as the starting point. This cocktail of changes has the following unprecedented effects.
The 6 unprecedented effects of Pillar 2:
1. Re-education of tax professionals and tax authorities to understand the new GloBE rules and the concepts of (tax) accounting
2. Largest new set of rules for intermediaries to advise upon
3. Need for intense collaboration between tax professionals and accountants
4. New domestic tax returns to be prepared in 135+ countries
5. Transparency on international tax positions far beyond CbC reporting
6. Need for standardized tax software given 135+ countries
Pillar 2 will impact both MNE Groups and intermediaries. MNE Groups will be forced to reorganize and integrate their accounting and tax departments and implement new systems. Intermediaries must rethink and redesign their international tax departments with two types of specialties, i.e., transfer pricing and tax accounting.
With the upcoming standardized software system, a new type of international tax specialist will emerge, the tax data analyst.
Are you ready for the future of tax?
Attend our webinar, where we explain the first part of the Pillar Two implementation package. Understand the content of the first Pillar Two implementation package and what to expect concerning the administrative guidance in 2023. Watch the webinar here : How to implement Pillar2 as per OECD?
Pillar 2 Software Early Registration Program
Benefit from our Pillar 2 Software Early Registration program: get prepared for the new OECD / EU GloBE regulations with early access to the Pillar Two Module, 25% discount, and more! Click on the button below to learn more about the program.