On 1 January 2024 the European Union will introduce a new tax law named  “Pillar Two”. These new regulations will be applicable to groups with a turnover of more than EUR 750 million. It includes both a potential tax levy and documentation obligation for the targeted groups if taxation within a jurisdiction falls under the 15% minimum. 138 countries worldwide already agreed to implement Pillar Two in their national legislation. In response to the rapid change of the global economy, multinational enterprises should have the agility and flexibility to adapt to the new economic environment as well as be in compliance with the regulations.

How familiar is your organization with Pillar Two? Does your organization fall within scope of Pillar Two? Do you understand the impact of Pillar Two on your organization? What actions you can take to be prepared? Grant Thornton is here to help. Not only by sharing relevant information and video’s off our compliance roadmap but we also offer you practical services including a risk focused quick-scan, subsequently followed by a review to help take the step from theory to practice.

Pillar Two compliance roadmap: 7 steps approach

Effect on Dutch group entities

The mainrules of Pillar Two

Insight in the legislation and top-up tax through a separate tax system.

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What are the exemptions?

Which entities are excluded from Pillar Two

Pillar Two differentiates between Constituent entities and excluded entities.

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About the safe harbour rules

The three tests to be met

When is the top-up-tax for a jurisdiction deemed to be zero during the transition period?

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What data is required?

Only with complete data you can proceed to step 5

Start thinking about the data model sooner rather than later.

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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.

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Who taxes?

Various taxation methods of Pillar Two

Three ways of allocating taxing rights.

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Filing return

The GloBE Information return and the top up tax return

Filing obligation of one or even more returns.

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Q&A

Implementation of Pillar Two in the US remains stalled, as proposed changes to the current US global minimum tax — the tax on global intangible low-taxed income (GILTI) — were left out of the recently enacted tax reconciliation bill, the 'Inflation Reduction Act.'

The OECD released Administrative Guidance (‘guidance’) on the Pillar Two Global Anti-Base Erosion Rules (GloBE Rules) on 2 February 2023. The guidance confirms the status of the United States’ minimum tax (known as the Global Intangible Low-Taxed Income, or 'GILTI') as a CFC Tax Regime under the GloBE Rules.

Some examples for your reference, Hungary with statutory CIT rate of 9%; Ireland 12.5%; Liechtenstien 12.5%; Qartar 10%; Paraguay 10%, etc. The ETR is more or less the same as the statutory rate, so companies need to be pay extra attention when there is operating entities within these jurisdictions.

Please remember the Netherlands will implement Pillar 2 which will come into effect in 2024 with application of IIR and UTPR, therefore, the Netherlands may levy the additional tax in situations where the Pillar 2 is not implemented in the subsidiaries’ or the parent company’s jurisdictions.

Watch our Pillar 2 webinar

In December 2022, the Member States of the European Union reached agreement on the introduction of a new tax “system”. This new tax system must be implemented in the European Union per 1 January 2024. During this webinar, we will introduce you to the rules of Pillar Two and guide you through the most important topics. You will learn about our 7-step approach and services. And we provide you with answers to relevant questions. 

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Our Services

We are delighted to invite you to our Quick Scan Call. We would like to walk you through the timeline with the latest updates on Pillar Two implementation across the world, while providing you with some takeaways from the Netherlands and EU aspects. Then we will guide you to the Grant Thornton approach, introducing Pillar Two compliance roadmap.

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1st focus: Quick scan – Awareness of Pillar Two

We are delighted to invite you to our Quick Scan Call. We would like to walk you through the timeline with the latest updates on Pillar Two implementation across the world, while providing you with some takeaways from the Netherlands and EU aspects. Then we will guide you to the Grant Thornton approach, introducing Pillar Two compliance roadmap.

We will finish the call with a high-level check on whether you’re your organization is within the scope, and which are the risky entities that may come in a position to pay additional top-up tax. For this call we would only need limited information such as the organizational structure of the group.

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2nd focus: Pillar Two Room

In this round we will focus on the specific status of your group and organization under Pillar Two. The goal of this call is to determine which information needs to be gathered for the companies within the group, based on the potential applicability of exemptions and/or safe harbours, thereby making the first step from theory to practice together with you.

The aim is to provide you with a list of the group companies that may fall within the scope of the exemptions and/or safe harbours, and the information requirements that come with that.

For this, we will need to obtain more detailed financial information beforehand to conduct reviews on exemptions, safe harbours, documentation requirements and potential software/system solutions for data gathering beforehand. 


Moving forward to actions, theory into practice

Such as:

  • Financial statements/audit file including all companies and PE’s and disregarded/hybrid entities of the group
  • The most recent CbCr Reporting

This service ties back into our 7 Step Approach and covers the first three steps of these 7 steps to help you get started:

  • Step 1: determination of scope
  • Step 2: check of application of exemptions
  • Step 3: check of application of safe harbours

As such, the Pillar Two Room provides an easy bridge to Step 4: documentation gathering, by including a clear overview of the documentation requirements per group company as part of the deliverable of the Pillar Two room. 

Our experts

Monique Pisters

Monique Pisters

Partner | Head of tax
Rotterdam
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Onno Backx

Onno Backx

Partner
Amsterdam
View full profile

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