OECD 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 did Pillar Two come into effect?

In many jurisdictions the Pillar Two rules (the Income Inclusion Rule -IIR- and the Qualified Domestic Minimum Top up Tax -QDMTT-) are already effective in 2024, whilst the Undertaxed Profits Rule (UTPR) will become effective in 2025. There are also other jurisdictions working on their domestic rules to implement Pillar Two as from 2024 and 2025.

PwC’s Data Input Catalog is at the centre of PwC’s end-to-end process for Pillar Two. Acting as the foundation to develop an extensive data strategy, assess operational preparedness, or determine a modelling approach, PwC’s Data Input Catalog is the core to Pillar Two readiness.

How does Pillar Two impact your business?

The impact of Pillar Two on the end-to-end operations of the tax department is monumental. Companies 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. In addition to Tax, there are several key stakeholder groups within the organization, including Controllership and Financial Planning & Analysis, that are impacted by the impending changes. One of the common challenges many companies are facing 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 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.

Check the status of the implementation of the Pillar Two rules by country in our PwC’s Pillar Two Country Tracker Online

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PwC’s Pillar Two Engine

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. 

Operational Readiness

Pillar Two has a pervasive impact on an organisation’s financial operating model requiring early stakeholder engagement and substantial budget and resource allocation to address the multitude of challenges. Organisations must ask themselves if their current data model, systems, technology, and processes can support the requirements introduced by this new international tax framework.

PwC professionals 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.

Data Strategy

Identifying the data requirements and developing a comprehensive data strategy should be one of the first steps that taxpayers take in preparation for Pillar Two. The variety of data sources owned by a diverse group of stakeholders makes the collection and synthesization of the data tremendously challenging. Early cross-functional engagement is critical to ensure that the appropriate data and system owners are aware of what will be required under Pillar Two, why it’s important, and how it may impact them going forward.

PwC professionals can help identify the data requirements and develop a data strategy rooted in systems and processes that can sustain reporting and compliance requirements upon enactment.

Quantitative analysis: PwC’s Pillar Two Engine

We can also help you meet your ongoing reporting, compliance and modelling needs. Pillar Two introduces new compliance and reporting requirements based on new calculation methodologies. While 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 to capture required data.

PwC’s Pillar Two Engine is a structured model for assessing the impact of OECD Pillar Two, configured to support the inconsistent and unique adoption of Pillar Two rules around the world and allow for flexibility as those rules continue to evolve. Multiple different variations and interpretations of local rules require an iterative modelling process for Pillar Two calculations. PwC’s Pillar Two Engine is flexible to allow for various data structures/sources. It also prioritises the key adjustments/elections. The modelling provides compliance and provision grade calculations as well as data visualisation to identify key territories where there is a risk of an OECD Pillar Two tax charge. 

Our engine utilises a centralised 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.

PwC’s Data Input Catalog

PwC’s Data Input Catalog is at the centre of PwC’s end-to-end process for Pillar Two. The Data Input Catalog defines the data requirements for Pillar Two, giving MNEs a comprehensive understanding of the amount of work that lies ahead of them and can help MNEs anticipate the unique challenges they will face. Acting as the foundation to develop an extensive data strategy, assess operational preparedness, or determine a modelling approach, PwC’s Data Input Catalog is the core to Pillar Two readiness.

Access PwC's Data Input Catalog

Contact us

Doug McHoney

Doug McHoney

International Tax Services Global Leader, PwC US

Mitchell Schuckman

Mitchell Schuckman

Global Tax Reporting & Strategy Leader, Partner, PwC US

Matt Ryan

Matt Ryan

Partner, Tax, PwC United Kingdom

Tel: +44 (0)7718 981211

Horacio Peña

Horacio Peña

Global Transfer Pricing Leader, PwC US

William Morris

William Morris

Global Tax Policy Leader, PwC US

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