Pillar Two’s minimum tax rules, agreed to in 2021 by the Organization for Economic Co-operation and Development (OECD), propose a minimum tax rate of 15% on many large multinational companies. More than 140 countries have signed on, and about 40 have already enacted laws to implement the tax.
These laws and regulations, which are complex in nature, fundamentally weave together taxes across a company’s enterprises. Filings will start in earnest in 2025 and into 2026. The rules change how multinationals pay tax, calculate liabilities and report under both financial reporting and tax compliance requirements. Leaders should consider investing in technology, sourcing and managing data and effecting change within their organization to adhere to compliance efficiently and effectively.
Investing in technology
Like any modern change, new and evolving technology plays a role. Tax leaders should consider how returns will be calculated and filed. A strategic approach can help to address immediate compliance needs while also considering wider impacts on business processes.
Today, many tax calculations occur in spreadsheets. Forward-thinking leaders may want to consider operating with technology solutions designed for the future, with the goal of having a technology stack and processes that are comprehensive and scalable.
And it’s not just internal technology that leaders need to consider. To the point, the OECD only recently released an updated administrative package and version of the GLOBE Information Return (GIR). Companies should be prepared to respond quickly and with flexibility.
The moment of filing might present the biggest hurdle. Tax teams may feel confident that they can do Pillar Two calculations. They have been provisioning for it for years. But getting the calculations into forms and governments’ hands as fast and efficiently as possible will take effort. Technology can play a role in easing challenges throughout the filing process.
Sourcing and managing data
Complying with Pillar Two regulations will require companies to collect and analyze substantively more data. We’re talking estimates of more than 100 core data points; a fraction of which most organizations needed prior to Pillar Two regulations. Some data exists in current data models or within enterprise resource planning (ERP) systems. Still other data might live on employees’ computers—or may not exist at all. Beyond the core data points, additional data may also need to be secured and applied during the income tax provisioning process.
Tax leaders should consider how to access required data sets, establish risks and controls, develop automation and address gaps. Leaders should ask, how does data fit into the larger tax technology strategy? How do enterprise-level strategies related to artificial intelligence or digital transformation play a role? Leaders should create a roadmap and make sure there is appropriate investment in tax solutions—which often includes collaborating with teams outside the tax function, like IT and legal, among others.
Pillar Two reporting will require a transparent data model that drives the calculations and meets reporting requirements. As jurisdictions continue to adopt rules to implement Pillar Two, tax leaders should evaluate data strategy and processes for flexible solutions to comply with a changing environment over the coming years.
Effecting change
Pillar Two further integrates policy standards in an increasingly global economy and will likely test many leaders guiding their companies through the changes, aiming for central discussions about how to comply across the global enterprise. They should understand the full scope, review operations on a country and jurisdiction level, and anticipate impacts. Engaging stakeholders from multiple disciplines will be critical.
Success often depends upon a foundation of strong technology, data and operational strategies. Tax leaders should further develop governance to continuously examine their systems and build in operational flexibility to pivot when necessary to ensure efficient processes with quality data sets.
Learn more from Deloitte about the Pillar Two rules and how strategic, measured and long-term approaches can help leaders navigate the waters.
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