Deloitte OECD Pillar Two Tax Advisory service

On 8 October 2021, the OECD announced that over 130 countries, including Israel, had agreed to adopt a Two-Pillar solution designed to address digital economy challenges, with Pillar Two focusing on ensuring Groups pay a minimum corporation tax rate of 15% in every relevant country. For these purposes, a "Group" is a multinational with consolidated revenues exceeding €750M. In the OECD update published on 17 July 2023, Israel reaffirmed its intention to apply the Pillar Two rules going forward, albeit the Israeli Tax Authority (“ITA”) is yet to announce a proposed implementation date. Regardless of this, given the rules are intended to come into force in approximately 37 countries from 1 January 2024, Israeli entities that are part of a consolidated Group that has a presence in one of the in-force countries will be subject to the Pillar Two rules from that date. This will require the Israeli entity to feed into the wider Group’s new Pillar Two compliance process or even suffer additional cash tax.

From policy to practice  

The Organization for Economic Co-operation and Development (OECD) Pillar Two model rules require that in-scope multinational enterprises pay a minimum level of tax on income arising in the jurisdictions they operate in. These rules are ambitious in scope and reach, designed to accommodate diverse international tax systems, tax consolidation rules, income allocations, entity classification rules, and business structures. For in-scope groups with multinational activity, they're likely to have a significant impact on tax operations.

Tax reform at this scale changes many aspects of how global businesses are taxed—and in turn, their data requirements, calculation, and reporting demands. In response, qualifying multinationals must work to understand the new rules and model the global financial, operational, and strategic impacts. To comply with Pillar Two data and reporting requirements, businesses must coordinate end-to-end tax, finance, IT, and legal inputs. This includes having access to the right data, at the right level of detail, evaluating existing technology, generating calculations, preparing and training resources, and managing stakeholder expectations. 

Deloitte practitioners can help you assess the impact of Pillar Two on your current and future business plans, from targeted technical support to global impact assessment and compliance oversight. We can help you identify and assess the impact of this new and complex legislation in multiple countries. 

OECD Pillar Two tax advisory services

Deloitte’s Pillar Two tax advisory services bring together the deep expertise of Deloitte tax practitioners and the analytical power of data and technology solutions to help multinational businesses assess and evaluate the tax implications of Pillar Two. We offer support from initial gap assessment to tax impact analysis to filing the Pillar Two return, and cover the following services:

• Policy 

• Impact assessment modeling

• Data assessment

• Finance system enhancement

• Tax technology 

• Technical advisory 

• Accounting and tax provision 

• Global compliance 

Policy 

Deloitte's Pillar Two policy advisers draw on long-established relationships with international tax authorities for insight into the future of global tax reform. We will help you understand the evolving consequences of OECD tax rules and local country legislation on your particular business, and work with you to navigate the complexities of Pillar Two income, covered taxes, compliance, and more for the jurisdictions you operate in. 

Impact assessment modelling 

Compliance with OECD Pillar Two demands detailed calculations involving large amounts of highly granular tax, accounting, and reporting data—likely much more detailed than you are currently collecting for existing tax reporting. Deloitte's Pillar Two assessment specialists can help you identify the data to be gathered and evaluate the potential impact on your business by modelling scenarios and communicating the results with powerful business intelligence and data visualizations. Taking into account your unique global operating footprint, Deloitte can help you estimate your tax liability, now and over time, as both the Pillar Two rules and your business evolve. 

Data assessment 

OECD Pillar Two's complex new data requirements include hundreds of data points, many of which are seldom captured by existing tax and accounting systems. Deloitte's Pillar Two specialists have created a data accelerator to help you understand what data is needed, where it might exist, and what gaps you may have. Our services help you identify and capture the specific tax, accounting, and company data required for OECD compliance. And we can help you implement sustainable data collection processes and technology with the potential to transform your tax data strategy. 

Finance system enhancement 

Global corporations have the opportunity to leverage their SAP, Oracle, or other ERP systems to support increasingly complex Pillar Two reporting requirements but will likely require enhancements to be able to provide the required data points, manage complex calculations, and integrate with group tax reporting systems. The specifics will depend on the configuration and flexibility of your current system together with reporting deadlines and planned upgrades. Whatever form your system enhancements take, Deloitte can help you bridge the gap between tax requirements and the technology response with end-to-end solutions designed to support both current and expected future OECD requirements. 

Tax technology

Pillar Two rules raise a number of data and tax technology related questions. Do you have access to the data, tools, and processes you need for compliance? In addition to data assessment—including evaluating the magnitude of data points required—you will need to analyze the information, review exposure, model financial impacts, and use the results to inform operational decisions. Deloitte's technology consultants have the skills to help you operationalize new reporting requirements across your ecosystem and business process. We can help you assess your ability to support new data, analysis, and reporting requirements; identify gaps; and design, deliver, and even help operate a new or expanded architecture that supports both current and projected Pillar Two requirements. With a deep understanding of business processes, our technology professionals can help create end-to-end solutions to meet your needs.

Technical advisory 

Pillar Two envisages a minimum global tax rate of 15% in the jurisdictions where in-scope multinational enterprises operate. But how its rules are interpreted may vary by jurisdiction. Combining deep country-specific knowledge and an international view of rule development, Deloitte technical advisory specialists can help evaluate the effect of corporate lifecycle events on tax, including the impact of Pillar Two on events ranging from IP locations to mergers, acquisitions, divestitures, and reorganizations. Drawing on this deep expertise, we can help you interpret both new and evolving rules with an eye toward the future of your business.

Accounting and tax provision 

Pillar Two dramatically increases the complexity and scope of tax accounting for multinational entities. Under IFRS and US GAAP rules, companies must account for the impact of Pillar Two for both interim and year-end reporting. The income tax accounts will need to reflect the minimum global tax for jurisdictions impacted by the new rules. Critical to this effort will be having the correct data at the appropriate level and leveraging technology to integrate the information into tax accounting processes. Deloitte's accounting and tax provision specialists can help you gather the relevant data, incorporate complex Pillar Two calculations into overall provision computations, and meet rapidly approaching financial statement deadlines.

Global compliance 

Completing the new OECD Pillar Two information return represents a global undertaking requiring hundreds of data points—many of which are complex composites of underlying data. The size and complexity of the data requirements are further complicated by timing: while in many cases the first return has an 18-month lead time following the accounting period end, subsequent returns must be filed in less time—so even before you complete your first return, you will need to make decisions about ongoing compliance and reporting. From return validation to completing the required paperwork, Deloitte compliance specialists can help ensure that your Pillar Two filing is accurate and timely.