Deloitte’s take on Pillar Two and global stock-based compensation

Pillar Two Overview:

1. The Organization for Economic Cooperation and Development (OECD) introduced Pillar Two rules (also referred to as “Global Anti-Base Erosion” or “GloBE” rules) that will require multinational companies to pay a global minimum level of tax on income from all covered jurisdictions they operate in.
2. Multinational companies in scope for Pillar Two with an effective Pillar Two tax rate below the minimum tax rate of 15% in any covered jurisdictions may be required to pay a top-up tax.
3. Pillar Two top-up taxes are slated to come into effect for accounting periods starting in 2024, and jurisdictions around the world have begun drafting, or in some cases enacted, implementation legislation.
4. The Pillar Two GloBE income/loss computation is generally based on financial accounting net income or loss determined for the constituent entity in preparing consolidated financial statements of the ultimate parent entity. For U.S. based multinationals, this generally means U.S. GAAP financial statements for each entity within the multinational group and includes the amount of stock-based compensation expense recorded in the constituent entity's financial accounts.