The Taxvibes Pillar 2 model

Part of the OECD and G20 BEPS project is to address the tax challenges arising from the digitalization and globalization of the economy. At the end of 2021, model rules have been established that aim to ensure that large multinationals with revenues of more than 750 million pay a minimum effective corporate tax rate of 15% on the results in all countries in which they operate. These rules are known as Pillar 2.

The new rules will be implemented as of 1 January 2024. This ambitious planning requires tax departments to act quickly and change software systems and collect the necessary data within the organization. To help with this we developed a Pillar 2 calculation model.

Far-reaching implications for tax departments

Tax departments are continuously required to have more understanding of IT solutions and data. Next to existing processes such as tax provisioning and Country-by-Country Reporting (CbCR), more data driven activities are constantly being added. Think of public CbCR, Pillar 1 and Pillar 2, ESG and further tax transparency.

The Pillar 2 model rules contain additional taxation rules that are different from regular reporting or corporate taxation. This means multinationals have to prepare additional figures for Pillar 2 in addition to the current IFRS/USGAAP, statutory and corporate tax return data for each entity and country. In practice this comes down to calculating income and tax in an alternative manner.

In order to carry out this alternative calculation method, processes and IT solutions must be set up before the end of this year. Depending on the IT solutions used within the company, this can be a costly and time-consuming activity.

The Taxvibes Pillar 2 model

To minimize the impact of the extra processes and calculations we developed a Pillar 2 model. This model leverages existing data available within the organization and makes the calculations needed for Pillar 2. The model can also act as a guide to determine what information still has to be retrieved from within the organization.

It is possible to use the model as a standalone solution, in specific tax software, or to integrate it into existing Enterprise Performance Management (EPM) solutions.