BEPS 2.0 project
Mid 2021 the OECD / G20 Inclusive Framework on BEPS provided a framework for reforming the international tax rules by introducing a two-pillar approach:
- Pillar One deals with the reallocation of certain profits from very large multinational enterprises (MNEs) to market jurisdictions and simplifying existing transfer pricing rules for all taxpayers.
- Pillar Two introduces a global minimum tax of 15% for MNEs with a consolidated revenue of EUR 750 million or more by implementing the Global Anti-Base Erosion Rules, the GloBE Model Rules, and a separate Subject To Tax Rule.
At the end of 2021 the Inclusive Framework reached agreement on Pillar Two and published the GloBE Model Rules. The European Commission followed with publication of a proposal for an EU Directive to incorporate Pillar Two into EU law, which was adopted by the end of 2022, set to be implemented and effective by 31 December 2023.
The GloBE Rules
Pillar Two aims to ensure that income is taxed at an appropriate rate, which can be achieved by three charging mechanisms:
- Qualified Domestic Minimum Top-up Tax (“QDMTT”): a jurisdictional minimum tax, allowing the Netherlands to tax any Top-up Tax from any Dutch low-taxed entities first.
- Income Inclusion Rule (“IIR”): if a jurisdiction does not implement a QDMTT, other jurisdictions can impose Top-up Tax at the parent level if it holds low-taxed entities.
- Undertaxed Profits Rule (“UTPR”): a backstop if not all Top-up Tax is captured under the IIR, which could for example be the case if the Ultimate Parent Entity and group entities in this jurisdiction are not based in a Pillar Two implementing jurisdiction. In the Netherlands the UTPR is determined on the basis of an inclusion of income, but it can also be collected through a denial of deductions.
When will these rules apply?
One of the challenges adding to the complexity of Pillar Two is when these rules will be effective. In most EU jurisdictions the rules have been implemented and are effective for most MNEs as from 1 January 2024 for the QDMTT and the IIR, with the UTPR being effective as from 1 January 2025. Many other jurisdictions, however, have different implementation time paths.
In our KPMG BEPS 2.0 tracker we provide BEPS Pillar Two content allowing access to announcements, jurisdictional status information, and jurisdiction contacts. The KPMG BEPS 2.0 tracker presents a world map view that highlights countries for which there is jurisdictional and legislative status information available.
Complex calculations
To assess whether the Pillar Two rules apply complex calculations are required to determine the GloBE Effective Tax Rate (“ETR”) in a jurisdiction. Various Safe Harbours have been introduced which may reduce the need for these complex calculations, but these also require further consideration to be able to rely on. A great deal of data, including non-financial information will be required across MNE groups.
The KPMG BEPS 2.0 Automation Technology (KBAT) is a cloud-based tool designed to help you evaluate, monitor, compile, track, calculate, analyze, report, and comply with Pillar Two obligations, through integration with the KPMG Digital Gateway platform.
How can KPMG Meijburg & Co help you?
Our expers will help you assess how BEPS 2.0 is going to impact your organization, both financially and operationally. Our approach to support you with getting ready for Pillar 2 consists of five steps.
The steps consider the different elements of becoming Pillar 2 ready; from an audit, tax, governance and technology perspective. The steps overlap each other, and are intended to partially run in parallel to optimally make use of available resources.
Our integrated cross-functional team of international tax, tax accounting, tax technology and tax compliance experts can support with
- navigating the complex rules and understanding the implementation and interpretation of these rules across the globe;
- accessing the financial and non-financial data required for the calculations whereby our proprietary KBAT technology can map the impact to what extent and in which countries your organization will be impacted by Pillar Two; and
- supporting with meeting the compliance requirements, ranging from local registrations to filing the GloBE Information Return and local Top-up Tax returns.
Contact us to find out more how we can support you!
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FAQ
What is the purpose of BEPS 2.0?
BEPS 2.0 aims to combat tax avoidance by multinational enterprises and create a fairer and more transparent international tax system. This is achieved by introducing a global minimum tax rate and reallocating taxing rights to countries where companies actually generate income.
Who is affected by BEPS 2.0?
BEPS 2.0 primarily targets large multinational enterprises with a consolidated annual revenue of 750 million euros or more. These enterprises must comply with the new rules and may have to pay additional taxes in countries where they operate.
When do the BEPS 2.0 rules come into effect?
The implementation of the BEPS 2.0 rules is planned for 2024. Most EU countries and other participating jurisdictions will apply the rules from January 1, 2024, for the Qualified Domestic Minimum Top-up Tax (QDMTT) and the Income Inclusion Rule (IIR), while the Under-Taxed Payments Rule (UTPR) will take effect from January 1, 2025.
