What is Pillar Two?
Pillar Two introduces a global minimum Effective Tax Rate (ETR) for multinational groups with a consolidated revenue of over €750m. These groups are now subject to a minimum ETR of 15% on income arising in low-tax jurisdictions.
When does Pillar Two come into effect?
Belgium, like many other jurisdictions, introduced the Pillar Two Qualified Domestic Minimum Top-up Tax (QDMTT), Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) into local law. The QDMTT and IIR first apply to accounting periods starting on or after 31 December 2023, and the UTPR first applies one year later. Nevertheless, many multinationals are already subject to Pillar Two since the transition rules capture certain transactions occurring after 30 November 2021.
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PwC’s Pillar Two Engine
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PwC’s Pillar Two Country Tracker provides a quick and easy tool to check the status of Pillar Two implementation in different countries and regions all over the world. The tool is updated on a regular basis as PwC is constantly monitoring country-specific developments.
Apart from a potential impact resulting from additional taxes (so-called top-up taxes), this new 15% minimum tax also requires MNEs to collect a large number of data points and significantly increases the compliance burden.
In order to provide relief to MNEs regarding their Pillar Two compliance obligations as the rules are implemented, the OECD introduced Transitional CbCR Safe Harbour provisions. The Transitional CbCR Safe Harbour excludes from the scope of Pillar Two an MNE’s operations in lower-risk jurisdictions in the initial years, if certain conditions are met.
How will Pillar Two impact your business?
The impact of Pillar Two on the end-to-end operations of tax departments 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 organisation that will be impacted by the impending changes.
Groups within scope will need to understand, evaluate, and model the impacts of Pillar Two across the organisation. This includes, but is not limited to, assessing the additional data and requirements in terms of reporting and compliance, evaluating existing technology ecosystems and capabilities, establishing processes and controls, preparing and training resources, and managing stakeholder expectations.
The form regarding the Qualified Domestic Minimum Top-up Tax should be filed on an annual basis within 11 months after the last day of the reporting year in scope of the rules. For in-scope groups with financial years that align with the calendar year, this means the first due date to file the return is 30 November 2025.
How can PwC assist you in the road towards Pillar Two readiness?
- Operational Readiness
- Data Strategy: PwC’s Data Input Catalog
- Impact Assessment: PwC’s Market Taxation Analyser tool
- Quantitative Analysis: PwC’s Pillar Two Engine
Operational Readiness
Pillar Two will have 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. This Pillar Two Guide for EMEA Multinational Enterprises is intended to provide EMEA taxpayers with an illustrative step-by-step approach to prepare for Pillar Two.
PwC’s teams of professionals are happy to help determine how to access the financial data needed to become compliant, identify gaps in the data needed for reporting, and reevaluate operations given the anticipated legal changes in many countries.
Data Strategy: PwC’s Data Input Catalog
Identifying these 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 data collection and consolidation 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 is important, and how it may impact them in the future.
PwC is happy to help identify the data requirements and develop a data strategy rooted in systems and processes that can sustain reporting and compliance requirements upon enactment.
PwC’s Data Input Catalog is at the heart of PwC’s end-to-end process for Pillar Two. This Catalogue defines the data requirements for Pillar Two, giving MNEs a comprehensive understanding of the amount of work that lies ahead, and helping them anticipate the unique challenges they will face. Acting as the foundation of developing an extensive data strategy, assessing operational preparedness, or determining a modelling approach, PwC’s Data Input Catalog is the core to Pillar Two readiness.
Impact Assessment: PwC’s Market Taxation Analyser tool
PwC’s Market Taxation Analyser tool (MARTA) is an interactive tool to quantify and visualise the anticipated financial impact of the introduction of Pillar Two in various scenarios. MARTA represents an important step in preparing for compliance with the rules. Moreover, it shows whether the Transitional CbCR Safe Harbour provisions are applicable to the MNE Group, and which tests are met by what jurisdiction.
Quantitative Analysis: PwC’s Pillar Two Engine
PwC’s Pillar Two Engine is a structured model to assess 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 variations and interpretations of local rules will require an iterative modelling process for Pillar Two calculations, therefore 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 a Pillar Two tax charge.
Our engine uses a centralised database with a vetted calculation engine in consultation with PwC Global technical and policy leaders. The database is dynamically updated following rule changes and new legislation in every jurisdiction.
PwC's Pillar Two Engine
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Pillar Two Engine
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