The introduction of Pillar Two regulations, also known as the Global Anti-Base Erosion (GloBE) rules, is causing a new challenge for multinational firms. These regulations, which originated from the OECD, aim to ensure that multinational enterprises pay a minimum level of tax no matter their country of domicile.
At CFO Solutions, we’ve seen our clients learn the full scope of the challenge that Pillar Two presents. Fortunately, with our team backgrounds spanning from accounting, audit, and IT, combined with our partnership with OneStream, we are able to advise on and implement solutions to help minimise the regulatory burden. The new Pillar Two add-in for OneStream, in collaboration with BDO, can make Pillar Two reporting a breeze.
The GloBE rules under Pillar Two introduce an income inclusion rule (IIR) and an undertaxed payment rule (UTPR). These rules ensure a minimum level of tax is paid on all income globally, increasing the tax liability for many businesses. Moreover, the administrative burden of complying with these complex regulations can be daunting. The IIR operates similar to controlled foreign corporation rules, while the UTPR denies deductions or requires an inclusion for payments that are not subject to a minimum level of tax.
Pillar Two aims to ensure that income is taxed at an appropriate rate and has several complicated mechanisms to ensure this tax is paid. The rules are complex and will require substantial new forms of financial data that tax departments may not currently have access to within their organization.
What multinational firms will soon be tasked with is the requirement for standardised reporting across their global entities on their worldwide earnings. This reporting requirement is the backbone of the Pillar Two regulatory scheme and will allow national regulators to ensure the global minimum tax payment is being satisfied.
Many firms will find, though, that satisfying these reporting requirements will take a great deal of staff time to ensure the reports are completed thoroughly and accurately. That’s where OneStream and CFO Solutions come in.
OneStream is a modern, unified, and cloud-based corporate performance management (CPM) solution that simplifies financial consolidation, planning, reporting, analytics, and financial data quality.
In collaboration with BDO, OneStream offers a comprehensive add-in solution to help businesses navigate the complexities of Pillar Two regulations. BDO's Pillar Two add-in provides a detailed analysis of safe harbours, calculates the global income or loss, and determines if any top-up tax is applicable for the jurisdiction. It also assists in allocating the top-up tax to the relevant parents and calculates whether any further top-up tax is due under the UTPR mechanism.
Our team recently hosted a webinar with BDO where the BDO team provided a demo of this add-in. For a hands on demo, watch the webinar here!
OneStream tracks the deferred tax asset that arises if you've made the globe loss election for any of the lower tax jurisdictions. The add-in is a complete Tax Performance management tool that guides you through data capture, calculation, and reporting requirements including BEPS Pillar 2.
The best part of this add-in? It is available on OneStream’s Partner Place marketplace, and it seamlessly integrates with your existing application. With the help of our implementation skills, we will be able to map the add-in to your existing charts of accounts and financial data.
The end result is a comprehensive Pillar Two reporting solution that stacks on top of your existing CPM application, with a reasonable cost of implementation.
The key benefit of the enterprise tax reporting suite is that these amounts, including your top-up taxes, will automatically feed back up into the tax provision solution. Moreover, the system can fully automate country by country reporting, collecting all financial data and automating it within OneStream.
This add-in also allows you to set up the entity classification from a drop-down menu of up to 13 entity classifications. This information will automatically roll forward from every period, from the first period from which you're using the system.
On top of that, this add-in provides a tax provision solution. It has different schedules available for input within the solution. The solution is IFRS or US GAAP focused and deals with the P&L approach or the balance sheet approach for deferred taxes. By aggregating data across all entities within a multinational group, OneStream ensures precision in minimum tax calculations under Pillar 2, guarding against inaccuracies, non-compliance, and potential penalties.
All of these benefits combine with the built-in advantages of OneStream’s unified platform.
While Pillar Two regulations present new challenges for multinational enterprises, solutions like OneStream can significantly simplify the process of compliance. By automating and streamlining the process, this add-in helps businesses meet their global tax obligations, reducing both their tax liability and administrative burden. With the right tools and strategies, businesses can successfully navigate the challenges of Pillar Two compliance.
It's not too late to prepare your team for the upcoming Pillar Two regulatory requirements. Book time with us today to discuss how OneStream and BDO’s Pillar Two add-in can do for you.