Pillar 2: A worldwide tax obligation
Pillar 2 tax law became effective Jan. 1 in the European Union and many other countries, and the new rules are generally applicable to multinationals with a turnover of more than 750 million euros. These laws govern both tax levies and documentation obligations for companies if their effective tax rate using Pillar 2 methodology within a jurisdiction is below the 15% minimum tax.
In total, 138 countries worldwide are expected to eventually implement Pillar 2 in their national legislation. Are you ready?
Where Pillar 2 is in effect
We have compiled an overview of the implementation status for a number of countries, to find out more, hover over the country on the map to explore further:
How Grant Thornton can help you implement Pillar 2
Grant Thornton is an international network with global Pillar 2 specialists available to assist you with both the implementation of Pillar 2 and with all your Pillar 2 compliance obligations.
To learn more on how we can assist you in preparing for Pillar 2, please hover on each card.
Our approach to navigating Pillar 2
Depending on your needs, Grant Thornton can guide you through the full process of becoming Pillar 2 compliant, or we can tailor our assistance to your specific needs at each individual step in the process. To help create a complete picture of Pillar 2 requirements and file the relevant returns, Grant Thornton has identified a seven-step approach.
- Overview of Pillar 2
- Exemptions and exclusions
- Safe harbor and penalty relief
- Data gathering
- Calculation and documentation
- Who is collecting?
- Filing returns
Effect on group entities
The main rules of Pillar 2
Insight into the legislation and top-up tax through a separate tax system
Our Pillar 2 specialists can assist with:
- Determination of constituent entities
- Determination of consolidated turnover
- Determination of Ultimate Parent Entity and Intermediate Parent Entities (as applicable)
- Dashboard tooling
- Checking annual reporting requirements
What are the exemptions?
Determining which entities are excluded from Pillar 2
Pillar 2 differentiates between constituent entities and excluded entities
Our Pillar 2 specialists can assist with:
- Determination of exempted constituent entities
- Dashboard tooling
About the safe harbor rules
The application of the safe harbor test - any top-up tax would be deemed to be zero during initial transition period in qualifying jurisdictions, removing requirement for full Pillar 2 calculations.
Our Pillar 2 specialists can assist with:
- CbCR quality review – is your CbCR Pillar 2 compliant?
- Transitional CbCR Safe Harbor review
- Operational transfer pricing
- Data analysis for Safe Harbor application
- Data tooling
What data is required for compliance?
Most ERP systems are not designed to acquire all of the hundreds of data points required in full GloBE calculations, forward-thinking and pro-active data sourcing strategies are paramount to remain compliant.
Start thinking about your data model sooner.
Our Pillar 2 specialists can assist with:
- Data gap assessments
- Quality review of the available data – including internal ownership of specific data points
- Review of the Pillar 2 compliance process
- Data tooling (local data availability)
New method to calculate the effective tax rate
Focus on the effective tax rate on a jurisdictional level.
Dividing the GloBE income by the qualifying taxes.
Our Pillar 2 specialists can assist with:
- Calculation of effective tax rate (ETR) per jurisdiction
- Calculation of local Qualified Domestic Minimum Top-up Tax (QDMTT)
- Calculation tooling
- Assistance with Controlled Foreign Company (CFC) rule allocation (including GILTI)
- Assistance with annual reporting requirements
Understanding jurisdiction authority
Reviewing various taxation methods of Pillar 2.
There are three ways of allocating taxing rights, the Income Inclusion Rule (IIR), the Undertaxed Payments Rule (UTPR), and the Qualified Domestic Minimum Top-up Tax (QDMTT).
Our Pillar 2 specialists can assist with:
- Determination of jurisdiction to which any top-up taxing right should be attributed
- Calculation of the IIR and/or the UTPR
- Dashboard tooling
The GloBE Information return and the top-up tax return
Filing obligation of one or even more returns.
Our Pillar 2 specialists can assist with:
- Support on preparing and filing of information tax return(s)
- Support on preparing and filing of top-up tax return(s)
- Filing software
Connect with our International Tax leaders
National Managing Partner,
Washington National Tax Office and International Tax Solutions
Grant Thornton Advisors LLC
David leads the firm's International Tax practice, which focuses on global tax planning, cross border merger and acquisition structuring, and working with global organizations in a variety of other international tax areas.
Washington DC, Washington DC
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