How will you meet your Pillar Two data challenge?
A tech-driven proof of concept can strengthen Pillar Two tax compliance
Multinational enterprise (MNE) groups continue to move at different speeds as Pillar Two becomes a reality. Until recently, most MNE groups focused on estimating top-up taxes to report in their consolidated financial statements, prioritizing materiality over accuracy. As a result, many may have taken shortcuts in their data collection and calculations.
For example, some MNEs manually collected historical source data as-is, rather than using current-year data, to model whether they meet one of the transitional safe harbour criteria. This reliance on historical data increases the risk of errors.
Other MNE groups created an enhanced chart of account and entity hierarchy in their enterprise resource planning (ERP) system. Some MNE groups also tactically applied automated data extraction tools and transformed the data into a format that could be ingested by their calculation engine. This is a good start. But many of these mechanisms still fall short of a reliable compliance solution. Additionally, these mechanisms don’t address other disclosure requirements, such as the European Union’s Corporate Sustainability Reporting Directive (CSRD) and Canada’s T1134 information return relating to foreign affiliates.
Clearly, data collection remains one of the biggest challenges in MNE groups’ Pillar Two readiness. Without complete data, MNE groups may struggle to prepare sufficiently detailed and accurate calculations that withstand audit scrutiny and reduce exposure to penalties and interest. They may also miss opportunities to understand the full tax implications of business changes and transactions.
Video
Data is a major challenge for taxpayers in complying with Pillar Two. PwC's Pillar Two Data Input Catalog helps outline and map the necessary data for calculations and compliance. Watch our video to learn more.
Break through your Pillar Two data obstacles
Pillar Two requires MNE groups with consolidated annual revenues of €750 million or higher to gather up to 280 distinct data points for every constituent entity.
We’ve found that most companies only maintain about half of this granular information in their ERP system. In many cases, the data in an MNE’s ERP system isn’t what’s needed for their Pillar Two calculations. For example, the ERP system may not include financial statements on a constituent entity basis. In other cases, those financial statements may not be maintained in the ultimate parent entity’s financial accounting standards.
Often, data is sourced from ERP systems, integrated with non-ERP data and, in some cases, complemented with new data. Many MNE groups can benefit from automating this data accumulation process—as well as the actual calculations.
Working alone, tax teams can struggle to gather the necessary data to perform these complex Pillar Two calculations. But by mobilizing a cross-disciplinary team with senior resources from tax, finance, legal and IT to create a Pillar Two data strategy, MNE groups can meet their compliance obligations with greater accuracy and efficiency.
Gather. Transform. Calculate. Analyze and report.
Book a demo to learn how PwC’s Pillar Two Engine can streamline your preparations.
Scale your Pillar Two data strategy
Starting with a proof of concept is a powerful way to build confidence in your Pillar Two data strategy. Calculating Pillar Two’s impact for a jurisdiction in which you cannot rely on safe harbour provisions helps pinpoint data-collection challenges early on. It also lets you measure the time saved through automation before scaling the proof of concept across your enterprise.
As you build out your Pillar Two data strategy, it’s valuable to assess your current capabilities. Do you have the human and technical resources available to meet your new compliance requirements? Will you need to hire additional employees and invest in new technologies? Are there more cost-effective alternatives that accelerate your outcomes?
A service provider that meets you where you are can provide strategic advice, technical expertise and advanced technology that align with your broader business goals. This may include in-source and co-source solutions, such as establishing and automating the data accumulation process. In fact, our Global Reframing Tax Survey 2025 shows these approaches resonate with Canadian organizations—88% are engaging external advisors to deal with new global taxes such as Pillar Two. There are also opportunities to use tax managed services to create capacity, improve processes and unlock business value by giving you access to top talent and technology. This lets you continuously evolve your tax function while proactively managing current and emerging tax risks.
So, how can you take a tech-driven approach to Pillar Two compliance?
Enhance the value of your Pillar Two efforts
A tech-driven Pillar Two data strategy gives you better visibility into your calculations. This is particularly important if your MNE group takes a decentralized approach to its Pillar Two calculations, as it gives the ultimate parent entity timely access and oversight, allowing you to recognize issues early and remedy any gaps.
It also helps you gain more value from your Pillar Two efforts. An effective data strategy creates new possibilities to streamline your broader tax provision and compliance processes as well as meet other reporting requirements. You can also gain real-time visibility into your global tax footprint, creating opportunities to better forecast the tax implications of business decisions and manage your effective tax rate—all while fostering a more scalable and sustainable approach to global tax compliance.
Considerations to assess your Pillar Two readiness
- Do you know where the data needed for Pillar Two sits within your MNE group?
- How much of your Pillar Two data is collected manually?
- How much work is needed to cleanse and transform the data needed for Pillar Two?
- What’s your level of comfort with the Pillar Two legislation affecting your MNE group?
- What’s your level of comfort with your MNE group’s systems and processes for Pillar Two calculations and compliance?
- Is your MNE group’s Pillar Two reporting sufficiently transparent for you to understand the results?
What technologies do your finance and tax teams use to collect and calculate Pillar Two data?
Do these technologies provide traceability and transparency that let users view the details behind the calculation?
How are your ERP systems and tax provision platforms configured to provide access to the required data points for Pillar Two calculations and compliance?
Book a demo
Curious to know more? Get in touch to see how you can automate your Pillar Two reporting requirements using our tech-enabled approach.
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National Growth Priorities Markets Leader, Partner International Tax, PwC Canada
