A lesson in global tax compliance management

6 March, 2024

How do you successfully navigate a complex regulatory tax framework? That was the challenge faced by a multinational group hitting the global turnover threshold that triggers BEPS 2.0 Pillar Two rules.  

Pillar Two subjects thousands of multinational groups worldwide to a global minimum tax of 15 percent. Critically, each jurisdiction in which a group has operations must be evaluated separately to determine if its effective tax rate falls under 15 percent. If so, then a Top-up Tax must be calculated and paid - either at the ultimate parent entity’s level or in the respective jurisdiction if a so-called Qualified Domestic Minimum Top-up Tax is introduced. Additionally, certain payments made to related parties and taxed below the minimum level may be subject to new withholding taxes.  

The complexity around these rules poses a major challenge for groups, including our client, who turned to our team of tax experts for advice.  

Our job? To analyse the impact of Pillar Two regulations, provide guidance on utilising Temporary Safe Harbour regulations, and help select technology solution to support the group‘s compliance efforts and ensure reliable group data and robust internal processes.  

End-to-end support

Our team of tax experts, led by Germany and spanning 30 territories worldwide, undertook a detailed modelling exercise to consider the client’s tax exposure through the lens of BEPS 2.0 and ensure it met is international tax obligations.  

We started by analysing the client’s business across the globe using country-by-country reporting (CBCR) information. This allowed us to identify high-risk entities that could trigger additional tax liabilities, consider the application of Temporary Safe Harbours, and ensure compliance with tax disclosures and deferred tax recognition. 

Planning now, for tomorrow

Through our meticulous approach, the client successfully navigated the complexities of Pillar Two implementation, ensuring compliance and fulfilling its filing obligations, and implemented robust tax compliance management systems across its group.  

As regulatory complexities continue to evolve, proactive collaboration with experienced consultants remains essential for ensuring sustained compliance and business success. 

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