OECD releases updated administrative guidance on Pillar 2

 

The OECD Inclusive Framework released a series of documents on the application of the Global Anti-Base Erosion (GloBE) Rules on Jan. 15, 2025, including updated requirements for the GloBE Information Return (GIR), guidance on deferred tax assets (DTAs), and the introduction of a central record for jurisdictions with transitional qualified status (e.g., countries with qualifying Pillar 2 rules).

 

The documents released included:

  • Administrative Guidance on Articles 8.1.4 and 8.1.5 of the GloBE Rules
  • Administrative Guidance on Article 9.1 of the GloBE Rules
  • Central Record of Legislation with Transitional Qualified Status

Although President Donald Trump issued memorandums attempting to rescind any commitments or agreements under Pillar 2, other countries could still move forward with implementation. 

 

8.1.4 and 8.1.5 of the GloBE: Clarity and standardization

The OECD’s updated guidance on the GIR provides additional insights into the compliance framework under Pillar 2, offering a cohesive and standardized approach to data collection. For the first time, the GIR introduces specific guidance on each data point, designed to assist tax administrations in assessing MNEs’ compliance with the GloBE Rules. By standardizing the data collection process across jurisdictions, the GIR seeks to simplify compliance.

 

The guidance ensures that MNE Groups can use a single source of information to complete each section of the GIR, which is the GloBE Model Rules and Commentary, when multiple jurisdictions have taxing rights under the GloBE Rules. The GIR also includes a few data points for MNE groups to disclose the impact of differences between the information reported and the jurisdiction’s domestic legislation.

 

The OECD also released an updated GIR which incorporated the current and prior Administrative Guidance.

 

Grant Thornton Insight:

 

The updated GIR enhances clarity on reporting obligations and provides a road map towards a standardized dataset. Reporting all information based on the GloBE Model Rules and Commentary introduces consistency. However, the requirement to report inconsistencies between the GloBE Model Rules and local legislation creates additional requirements and further complicates the compliance process for MNEs.

 

Article 9.1 of the GloBE Rules: Limitations on deferred tax assets

The OECD’s administrative guidance introduces important updates on the treatment of DTAs under Article 9.1 of the GloBE Rules, particularly in transitional contexts. The guidance excludes certain pre-GloBE DTAs from ETR calculations if they arise from government-granted tax benefits, retroactive elections or corporate tax regimes introduced after Nov. 30, 2021. These limitations aim to align DTA treatment with the principles of the GloBE Rules, preventing deferred tax accounting mechanisms from distorting ETR results or sheltering future low-taxed income.

 

The administrative guidance includes a grace period, which provides some flexibility and allows up to 20% of eligible deferred tax expenses to be included in ETR calculations for a limited number of fiscal years. However, this relief is subject to caps and other detailed requirements. The interplay between these DTA adjustments and the Transitional CbCR Safe Harbor introduces an additional layer of complexity.

 

Central record of legislation with transitional qualified status

The administrative guidance introduces a centralized record of jurisdictions that have obtained transitional qualified status under the GloBE Rules. This record lists jurisdictions with legislation meeting the transitional qualification mechanism requirements for the Income Inclusion Rule (IIR), Qualified Domestic Minimum Top-Up Tax (QDMTT), and the associated QDMTT Safe Harbor. The OECD also released FAQs associated with the Central Record of Legislation.

 

By providing a publicly available and regularly updated list, the guidance aims to enhance transparency, simplify compliance and offer clarity on jurisdictions’ alignment with Pillar 2 standards.

 

The central record represents a temporary measure, allowing jurisdictions to self-certify their compliance under the transitional framework until a full legislative review and monitoring process is established. While the absence of a jurisdiction from the list does not indicate non-compliance, it signifies that the qualification process has not yet been completed or initiated. This approach ensures swift recognition of qualified regimes and reduces uncertainty for multinational enterprises navigating the GloBE requirements.

 
 

Contacts:

 
 
Cory Perry

Washington DC, Washington DC

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