Pillar Two compliance roadmap part 7: filing returns

As we have already pointed out in the previous videos,  multinational corporations will experience an increase in both their compliance and reporting responsibilities across the different jurisdictions they operate in.

Under the Pillar 2 Model Rules, the EU introduced a standardized 'GloBE International Return', which resembles an additional separate tax return. The group entity will have a period of 15 months (or 18 months in the first year when the rules come into effect) to complete and submit the GloBE International Return to the national tax authorities. However, certain specific cases may qualify for exemptions regarding the completion and filing of this return.

The OECD is currently working on creating a standardized information return. They acknowledge the importance of striking a balance between providing tax authorities with detailed information while also minimizing burdensome compliance requirements for businesses.

Let me summarize for you what information this declaration shall contain:

1. First of all: General information about the group, like the group name, fiscal year, identification of the filing entity and some general accounting information.
2. Than the corporate structure, like the details of the ultimate parent entity, group entities and excluded entities, but also changes to the corporate structure during the reported fiscal year.
3. The effective tax rate, including the calculation of the specific effective tax rate and the applicability of safe harbours and/or deferred tax adjustments.
4. Entity information, including general information about the globe income and covered taxes.
5. And finally the Top-up tax allocation and attribution: This process involves three main topics; Identifying the low-tax country, applying the income inclusion rule and calculating the top-up tax amount for the country

The OECD inclusive framework is actively working on creating centralized filing requirements that will enable companies to file their information return with the tax authority of their ultimate parent entity or another designated filing entity. This streamlined approach aims to simplify the reporting process for multinational companies.

Once filed, the information return will be automatically shared and exchanged with the tax authorities of countries where other group entities of the company are located. This allows for efficient and seamless sharing of relevant information across jurisdictions, promoting transparency and cooperation among tax authorities.

The ultimate goal is to establish a standardized and efficient system that facilitates the exchange of tax-related information between multinational companies and tax authorities, ensuring compliance and reducing administrative burdens.

So now you know a little more about what should be filed under Pillar 2. Hopefully, our roadmap with 7 steps helped you prepare for Pillar 2 regulations. Please check out our website for actual information and our services to guide you toward compliance.  Thank you for watching and if you have any questions, please contact me or one of my colleagues.