- Simulate the taxation of the digital economy in different scenarios
- Have full control over the impact of OECD Pillar Two
- Get a response assessment for future challenges
- Benefit from a high usability of the tool
Your challenge with the OECD BEPS 2.0 project - Impact of Pillar Two
As part of the OECD BEPS project launched in 2015, the issue of global minimum taxation of internationally active corporate groups has been a central topic of discussions. The OECD has developed an approach based on two pillars: OECD Pillar One deals with new profit allocation rules in different countries. Pillar Two aims to ensure that in inbound and outbound cases, low-taxed subsidiaries or permanent establishments are taxed at least at a minimum tax rate at group level. These new challenges must be met with a holistic approach: On the one hand, a high level of data transparency and tax compliance should be achieved with the new regulations. On the other hand, possible consequences for your company resulting from the new regulations should be identified (e.g. necessary adjustments in accounting, reporting and IT). But how can the impact of Pillar Two on your group be determined?
Our solution: Simulation of the global minimum taxation according to Pillar Two
To meet the challenges of OECD Pillar Two, we have developed an interactive tool to quantify and visualize the potential impact on your business: The PwC Market Taxation Analyzer (MARTA) helps you simulate the tax effects in a simplified way. It forecasts different scenarios in terms of profit distribution per jurisdiction and the potential tax impact. This allows you to manage the tax complexity of this new regulation and qualitatively assess what effect the proposed taxation regime will have on your tax payment position. Finally, the burden comparisons also enable you to consider at an early stage whether and, if so, how your company should respond to the planned new regulations in order to ensure tax compliance (e.g., by making adjustments in accounting, reporting and IT).
The simulation with MARTA takes place in two phases:
- Country Selection: Selection of countries potentially affected by Pillar Two based on Country-by-Country Reporting (CbCR).
- Alteryx & Power BI: Processing of CbCR data from an Alteryx flow and visualization via Power BI for which countries a detailed calculation is useful
- Workshop: Joint evaluation of results from phase 1 and selection of countries for detailed calculation
- Calculation of the estimated top-up tax: Query of details on the selected countries via an Excel spreadsheet and calculation of the top-up tax based on these details.
- Alteryx & Power BI: Analysis and visualization of the results via Alteryx & Power BI
- Workshop: Discussion of Pillar Two assessment results and next steps, such as responses to identify and manage potential additional burdens from proposed regulations
- Assessment of the Excel templates
- Online access to the MARTA tool
- Forecasting the potential impact of different scenarios
- Discussing the impact on your business
Simulate the impact of OECD Pillar Two.
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What is the OECD's BEPS 2.0 project about?
Pillar 1 establishes a new profit allocation rule for internationally operating groups that goes beyond the arm's length principle: Accordingly, profits are 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 taxation level.
In the context of Pillar One, this means:
- Amount A: Taxing right of the market/user countries on the group-wide residual profit (predefined standard rates for the deferral of the non-routine profit as well as the Amount A portion)
- Amount B: Size- and industry-independent standardized 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 II) aims to limit tax competition between countries as well as to minimize 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, highly simplified, a form of taxation on the addition of income, which is modified to achieve the minimum taxation. In contrast, the UTPR is intended to limit the deductibility of tax-damaging payments
How do Pillar One and Pillar Two intertwine?
Due to currently discussed high pick-up limits for Pillar One, the majority of large international corporate groups will probably only fall under Pillar Two. For the others: For the GloBE calculation in Pillar Two, the possible adjustment amount from Pillar One is required.