Market Taxation Analyzer Pillar Two

Pillar 1 establishes a new profit allocation rule for internationally operating groups that goes beyond the arm's length principle: according to this, profit is allocated regardless of the local physical presence, so that digital business models are also covered. Pillar 2 introduces a global minimum taxation to ensure a uniform minimum level of taxation.

In the context of Pillar One this means:

• Amount A: taxation right of the market/user states on the group-wide residual profit (predefined standard rates for the accrual of the non-routine profit as well as the Amount A share).
• Amount B: Size- and sector-independent standardised remuneration for so-called "baseline" marketing and sales activities.

In the context of Pillar Two this means:

• The introduction of a global minimum tax (GloBE, also known as Pillar Two) aims to limit tax competition between countries and minimise remaining Base Erosion and Profit Shifting (BEPS) risks.
• The minimum taxation is to be enforced primarily by means of the Income Inclusion Rule (IIR) and the Undertaxed Payments Rule (UTPR). The IIR is a highly simplified form of income taxation modified to achieve the minimum taxation.

Due to the currently discussed high thresholds for Pillar One, the majority of large international corporate groups are likely to fall under Pillar Two only. For the others: For the GloBE calculation in Pillar Two, the possible adjustment amount from Pillar One is required.