Pillar Two Readiness

Are you #PillarTwoReady?

What is Pillar Two?

Under an OECD Inclusive Framework, more than 140 countries agreed to enact a two-pillar solution to address the challenges arising from the digitalization of the economy. Pillar Two introduces a global minimum Effective Tax Rate (ETR) via a system where multinational groups with consolidated revenue over €750m are subject to a minimum ETR of 15% on income arising in low-tax jurisdictions.

When does Pillar Two come into effect?

The OECD has recommended that the Pillar Two rules become effective in 2024, with the exception of the Undertaxed Profits Rule (UTPR) which is recommended to become effective in 2025. The EU Member States formally adopted the Minimum Tax Directive on December 15, 2022 and Member States shall transpose the Directive into their domestic law by December 31, 2023. Many other countries are working on their domestic rules to implement Pillar Two. Nevertheless, many multinationals already are subject to Pillar Two since the transition rules capture certain transactions occurring on or after November 30, 2021.

How will Pillar Two impact your business?

The impact of Pillar Two on the end-to-end operations of the tax department is monumental. Companies will need to ensure they have the data needed to forecast and model in the interim as well as the data to maintain reporting and compliance requirements upon enactment. In addition to Tax, there are several key stakeholder groups within the organization, including Controllership and Financial Planning & Analysis, that will be impacted by the impending changes. One of the common challenges many companies will face is a gap in resources to lead such a broad BEPS 2.0 Readiness initiative. Amongst others, the person in this lead role must be able to address the questions and challenges across four broad categories: People, Process, Data and Technology.

Groups within scope will need to understand, evaluate, and model the impacts of Pillar Two across the organization. This includes, but is not limited to, assessing the additional data and reporting/compliance requirements, evaluating the existing technology ecosystem and capabilities, establishing processes and controls, preparing and training resources, and managing stakeholder expectations.

How PwC can help your company with Pillar Two

PwC professionals can help you assess and model the likely financial and operational consequences of Pillar Two. 

We can help determine how to access the financial data needed to comply, identify gaps in the data needed for reporting, and reevaluate operations given the anticipated law changes in many countries. 

We can also help you meet your ongoing reporting and compliance obligations. Pillar Two introduces new compliance and reporting requirements based on new calculation methodologies. There is some overlap between the data points used for existing reporting and those required for Pillar Two. We recommend undertaking an assessment to confirm whether required data points can be extracted from source systems or whether change requests are required in order to capture required data.

PwC’s Pillar Two Engine is a structured model for assessing the impact of OECD Pillar Two and is flexible to allow for various data structures/sources. It also prioritizes the key adjustments/elections. The modelling provides compliance and provision grade calculations as well as data visualization to identify key territories where there is a risk of an OECD Pillar Two tax charge. 

Our engine utilizes a centralized database with a vetted calculation engine in consultation with PwC Global technical and policy leaders. The database is dynamically updated for rule changes and new legislation in each jurisdiction.  

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A New Global Tax System: Are you #PillarTwoReady?

Contact us

Doug McHoney

Doug McHoney

International Tax Services Global Leader, PwC US

Stef van Weeghel

Stef van Weeghel

Global Tax Policy Leader, PwC Netherlands

Tel: +31 88 792 6763

Mitchell Schuckman

Mitchell Schuckman

Global Tax Reporting & Strategy Leader, PwC US

Tel: +1 516-330-8757

Matt Ryan

Matt Ryan

Partner, Tax, PwC United Kingdom

Tel: +44 (0)7718 981211

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