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Solution
Pillar Two Compliance Automation
Accelerate your Pillar Two compliance with our approach to automate the process in Oracle Tax Reporting
Multinational Enterprises (MNEs) navigate through the complexities of Pillar Two, like additional compliance requirement, data gathering from multiple sources and complex calculations across jurisdictions. Deloitte can help to overcome these challenges by leveraging the power from the tax automation functionality within Oracle Enterprise Performance Management (EPM). Deloitte has developed a cutting-edge Fast Track solution that streamlines the implementation process for Tax Accounting, Country by Country Reporting and Pillar Two.
"Deloitte is a thought leader for tax technology. Deloitte has a proven track record with our products and has led over 50 successful implementations of both Hyperion Tax Provision (former on-premise solution) and EPM Tax Reporting (TRCS) worldwide. As from the start of 2022 we have been working closely together, and also exclusively, in setting up Pillar II logic into EPM Tax Reporting." - Marc Seewald, VP EPM Product Management Oracle
Pillar Two, a new and uncharted challenge for MNEs
Where do the two Pillars come from?
As part of the OECD's global tax reform efforts, Pillar Two aims to ensure a minimum effective tax rate of 15% in each jurisdiction where a MNE operates. The scope of Pillar Two covers MNEs with a global turnover of 750 million annually. With its implementation planned for 2024, Pillar two is designed to address tax competition and the "race to the bottom" phenomenon.
Understanding Pillar Two
The OECD has published model rules outlining the implementation of Pillar two. Certain steps need to be taken to determine whether the effective tax rate criteria is met which involves calculating the so-called GLoBE (Global Anti Base Erosion) income and Covered Taxes per jurisdiction. Dividing the Covered taxes by the GLoBE income gives insight in the GLoBE effective tax rate. For a comprehensive understanding of these calculations we encourage you to read more here.
Transitional Safe Harbours
To ease the transition to the Pillar Two, OECD issued specific Safe Harbours. It consists of three tests:
- The de minimis test: Revenue and income below a certain threshold
- The simplified ETR test: A simplified calculated effective tax rate that equals or exceeds an agreed rate.
- The routine profits test: No excess profits after excluding routine profits.
If a jurisdiction passes one of these tests no further detailed calculations are required. The safe harbours apply to fiscal years beginning on or before December 31, 2026 but not after June 30, 2028.
Typical challenges MNE's are facing
Compliance with Pillar Two rules will require companies to start with the Financial Accounting data based on Group GAAP per entity and modify it as per the rules. There are over 160 data points which need consideration and which typically are spread out over multiple data sources.
This is a list of the challenges MNE's often face when assessing and implementing Pillar Two rules:
Pillar Two automation
Pillar Two compliance could be achieved with lots of manual effort and spreadsheets. The amount of work however means that MNEs would be dedicating a significant number of people to attain that goal. That is the right moment to streamline your tax accounting, Country by Country Reporting and Pillar Two process using one solution that captures it all!
Why automation?
Fast Track an automation approach using Oracle EPM tax reporting
Oracle offers one of the few mature tax accounting and reporting solutions in the market. Within Deloitte we have extensive experience by implementing Oracle EPM Tax Reporting to enable tax accounting processes for many clients.
Deloitte is now benefitting from this experience in automating Pillar Two using the proven fast track approach and leveraging existing functionality within Oracle EPM.
The Deloitte fast track method reduces the implementation time for organizations to automatically gather, calculate, and determine the Pillar Two effective tax rate per jurisdiction.
